THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND 
ENFORCEMENT OF SECURITY INTEREST ACT, 2002 
(Last Updated on 29-6-2021) 
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ARRANGEMENT OF SECTIONS 
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CHAPTER I 

PRELIMINARY 

SECTIONS 

1.  Short title, extent and commencement. 
2.  Definitions. 

CHAPTER II 

REGULATION OF SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS OF BANKS AND 
FINANCIAL INSTITUTIONS 

3.  Registration of asset reconstruction companies. 
4.  Cancellation of certificate of registration. 
5.  Acquisition of rights or interest in financial assets. 
5A. Transfer of pending applications to any one of Debts Recovery Tribunals in certain cases. 
6.  Notice to obligor and discharge of obligation of such obligor. 
7.  Issue of security by raising of receipts or funds by asset reconstruction company. 
8.  Exemption from registration of security receipt. 
9.  Measures for assets reconstruction. 
10.  Other functions of asset reconstruction company. 
11.  Resolution of disputes. 
12.  Power of Reserve Bank to determine policy and issue directions. 
12A. Power of Reserve Bank to call for statements and information. 
12B. Power of Reserve Bank to carry out audit and inspection. 

CHAPTER III 

ENFORCEMENT OF SECURITY INTEREST 

13.  Enforcement of security interest. 
14.  Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking 

possession of secured asset. 

15.  Manner and effect of take over of management. 
16.  No compensation to directors for loss of office. 
17.  Application against measures to recover secured debts. 
17A. [Omitted.] 
18.  Appeal to Appellate Tribunal. 
18A. Validation of fees levied. 
18B. [Omitted.] 
18C. Right to lodge a caveat. 

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SECTIONS 

19.  Right of borrower to receive compensation and costs in certain cases. 

CHAPTER IV 

CENTRAL REGISTRY 

20.  Central Registry. 
20A. Integration of registration systems with Central Registry. 
20B. Delegation of powers. 
21.  Central Registrar. 
22.  Register of securitisation, reconstruction and security interest transactions. 
23.  Filing of transactions of securitisation, reconstruction and creation of security interest. 
24.  Modification of security interest registered under this Act. 
25.  Asset reconstruction companyor secured creditors to report satisfaction of security interest. 
26.  Right to inspect particulars of securitisation, reconstruction and security interest transactions. 
26A.Rectification by Central Government in matters of registration, modification and satisfaction, 

etc. 

CHAPTER IVA 
REGISTRATION BY SECURED CREDITORS AND OTHER CREDITORS 

26B. Registration by secured creditors and other creditors. 
26C. Effect of the registration of transactions, etc. 
26D. Right of enforcement of securities. 
26E. Priority to secured creditors. 

CHAPTER V 

OFFENCES ANDPENALTIES 

27.  Penalties. 
28.  [Omitted.] 
29.  Offences. 
30.  Cognizance of offence. 
30A. Power of adjudicating authority to impose penalty. 
30B. Appeal against penalties. 
30C. Appellate Authority. 
30D. Recovery of penalties. 

CHAPTER VI 

MISCELLANEOUS 

31.  Provisions of this Act not to apply in certain cases. 
31A. Power to exempt a class or classes of banks or financial institutions. 
32.  Protection of action taken in good faith. 
33.  Offences by companies. 
34.  Civil court not to have jurisdiction. 
35.  The provisions of this Act to override other laws. 
36.  Limitation. 
37.  Application of other laws not barred. 

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SECTIONS 

38.  Power of Central Government to make rules. 
39.  Certain provisions of this Act to apply after Central Registry is set up or cause to be set up. 
40.  Power to remove difficulties. 
41.  Amendments to certain enactments. 
42.  Repeal and saving. 
THE SCHEDULE. 

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THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS 
ANDENFORCEMENT OF SECURITY INTEREST ACT, 2002 

ACT NO. 54 OF 2002 

 [17th December, 2002.]  

1[An Act to regulate securitisation and reconstruction of financial assets and enforcement of 
security  interest  and  to  provide  for  a  Central  database  of  security  interests  created  on  property 
rights, and for matters connected therewith or incidental thereto.] 

BE it enacted by Parliament in the Fifty-third Year of the Republic of India as follows:— 

CHAPTER I 

PRELIMINARY 

1.  Short  title,  extent  and  commencement.—(1)  This  Act  may  be  called  the  Securitisation  and 

Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. 

(2) It extends to the whole of India. 

(3) It shall be deemed to have come into force on the 21st day of June, 2002. 

2. Definitions.—(1) In this Act, unless the context otherwise requires,— 

(a)  “Appellate  Tribunal”  means  a  Debts  Recovery  Appellate  Tribunal  established  under  
sub-section  (1)  of  section 8  of  the  Recovery  of  Debts  Due  to  Banks and  Financial  Institutions  Act, 
1993 (51 of 1993); 

(b) “asset reconstruction” means acquisition by any  2[asset reconstruction company]of any right 
or interest of any bank or financial institution in any financial assistance for the purpose of realisation 
of such financial assistance; 

3[(ba)  “asset  reconstruction  company”  means  a  company  registered  with  Reserve  Bank  under 
section  3  for  the  purposes  of  carrying  on  the  business  of  asset  reconstruction  or  securitisation,  or 
both;] 

(c) “bank” means— 

(i) a banking company; or 

(ii) a corresponding new bank; or 

(iii) the State Bank of India; or 

(iv) a subsidiary bank; or 

4[(iva) a multi-State co-operative bank; or] 

(v)  such  other  bank  which  the  Central  Government  may,  by  notification,  specify  for  the 

purposes of this Act; 

(d)  “banking  company”  shall  have  the  meaning  assigned  to  it  in  clause  (c)  of  section  5  of  the 

Banking Regulation Act, 1949 (10 of 1949); 

1. Subs. by Act 44 of 2016, s. 2, for the long title (w.e.f. 1-9-2016). 
2. Subs. by s. 3, ibid., for “securitisation company or reconstruction company” (w.e.f. 1-9-2016). 
3. Ins. by s. 4, ibid. (w.e.f. 1-9-2016). 
4. Ins. by Act 1 of 2013, s. 2 (w.e.f. 15-1-2013). 

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(e) “Board” means the Securities and Exchange Board of India established under section 3 of the 

Securities and Exchange Board of India Act, 1992 (15 of 1992); 

(f) “borrower” means 1[any person who, or a pooled investment vehicle as defined in clause (da) 
of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) which,] has been granted 
financial assistance by any bank or financial institution or who has given any guarantee or created any 
mortgage or pledge as security for the financial assistance granted by any bank or financial institution 
2[and includes a person who, or a pooled investment vehicle which,] becomes borrower of a  3[asset 
reconstruction  company]  consequent  upon acquisition  by  it  of  any  rights  or interest  of  any  bank  or 
financial institution in relation to such financial assistance 4[or who has raised funds through issue of 
debt securities]; 

(g)  “Central  Registry”  means  the  registry  set  up  or  cause  to  be  set  up  under  sub-section  (1)  of 

section 20; 

4[(ga)  “company”  means  a  company  as  defined  in  clause  (20)  of  section  2  of  the  Companies  

Act, 2013 (18 of 2013);] 

(h) “corresponding new bank” shall have the meaning assigned to it in clause (da) of section 5 of 

the Banking Regulation Act, 1949 (10 of 1949); 

5[(ha) “debt” shall have the meaning assigned to it in clause (g) of section 2 of the Recovery of 

Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and includes— 

(i) unpaid portion of the purchase price of any tangible asset given on hire or financial lease 

or conditional sale or under any other contract; 

(ii)  any  right,  title  or  interest  on  any  intangible  asset  or  licence  or  assignment  of  such 
intangible asset, which secures the obligation to pay any unpaid portion of the purchase price of 
such  intangible  asset  or  an  obligation  incurred  or  credit  otherwise  extended  to  enable  any 
borrower to acquire the intangible asset or obtain licence of such asset;] 

(i) “Debts Recovery Tribunal” means the Tribunal established under sub-section (1) of section 3 

of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (51 of 1993); 

4[(ia)  “debt securities”  means  debt  securities  listed  in  accordance  with  the  regulations  made  by 

the Board under the Securities and Exchange Board of India Act,1992 (15 of 1992);] 

6[(j) “default” means— 

(i)  non-payment  of  any  debt  or  any  other  amount  payable  by  the  borrower  to  any  secured 
creditor  consequent  upon  which  the  account  of  such  borrower  is  classified  as  non-performing 
asset in the books of account of the secured creditor; or 

(ii)  non-payment  of  any  debt  or any  other amount  payable  by  the  borrower  with  respect  to 
debt securities after notice of ninety days demanding payment of dues served upon such borrower 
by the debenture trustee or any other authority in whose favour security interest is created for the 
benefit of holders of such debt securities;] 

1. Subs. by Act 13 of 2021, s. 162, for “any person who” (w.e.f. 1-4-2021). 
2. Subs. by s. 162, ibid., for “and includes a person who” (w.e.f. 1-4-2021). 
3. Subs. by Act 44 of 2016, s. 3, for “securitisation company or reconstruction company” (w.e.f. 1-9-2016). 
4. Ins. by s. 4, ibid. (w.e.f. 1-9-2016). 
5. Subs. by s. 4, ibid., for clause (ha) (w.e.f. 1-9-2016). 
6. Subs. by s. 4, ibid., for clause (j) (w.e.f. 1-9-2016). 

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(k)  “financial  assistance”  means  any  loan  or  advance  granted  or  any  debentures  or  bonds 
subscribed or any guarantees given or letters of credit established or any other credit facility extended 
by any bank or financial institution  2[including funds provided for the purpose of acquisition of any 
tangible asset on hire or financial lease or conditional sale or under any other contract or obtaining 
assignment or licence of any intangible asset or purchase of debt securities;] 

(l) “financial asset” means debt or receivables and includes— 

(i) a claim to any debt or receivables or part thereof, whether secured or unsecured; or 

(ii) any debt or receivables secured by, mortgage of, or charge on, immovable property; or 

(iii) a mortgage, charge, hypothecation or pledge of movable property; or 

(iv)  any  right  or  interest  in  the  security,  whether  full  or  part  underlying  such  debt  or 

receivables; or 

(v)  any  beneficial  interest  in  property,  whether  movable  or  immovable,  or  in  such  debt, 

receivables, whether such interest is existing, future, accruing, conditional or contingent; or 

1[(va) any beneficial right, title or interest in any tangible asset given on hire or financial lease 
or  conditional  sale  or  under  any  other  contract  which  secures  the  obligation  to  pay  any  unpaid 
portion of the purchase price of such asset or an obligation incurred or credit otherwise provided 
to enable the borrower to acquire such tangible asset; or 

(vb)  any  right,  title  or  interest  on  any  intangible  asset  or  licence  or  assignment  of  such 
intangible asset, which secures the obligation to pay any unpaid portion of the purchase price of 
such  intangible  asset  or  an  obligation  incurred  or  credit  otherwise  extended  to  enable  the 
borrower to acquire such intangible asset or obtain licence of the intangible asset; or] 

(vi) any financial assistance; 

(m)“financial institution” means— 

(i) a public financial institution within the meaning of section 4A of the Companies Act, 1956 

(1 of 1956); 

(ii) any institution specified by the Central Government under sub-clause (ii) of clause (h) of 
section  2  of  the  Recovery  of  Debts  Due  to  Banks  and  Financial  Institutions  Act,  1993  
(51 of 1993); 

(iii)  the  International  Finance  Corporation  established  under  the  International  Finance 

Corporation (Status, Immunities and Privileges ) Act, 1958 (42 of 1958); 

1[(iiia)  a  debenture  trustee  registered  with  the  Board  and  appointed  for  secured  debt 

securities; 

(iiib)  asset  reconstruction company,  whether  acting  as  such  or  managing  a  trust  created for 

the purpose of securitisation or asset reconstruction, as the case may be;] 

(iv) any other institution or non-banking financial company as defined in clause (f) of section 
45-I of the Reserve Bank of India Act, 1934 (2 of 1934), which the Central Government may, by 
notification, specify as financial institution for the purposes of this Act; 

1[(ma)  “financial  lease”  means  a  lease  under  any  lease  agreement  of  tangible  asset,  other  than 
negotiable instrument or negotiable document, for transfer of lessor's right therein to the lessee for a 

1. Ins. by Act 44 of 2016, s. 4 (w.e.f. 1-9-2016). 

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certain time in consideration of payment of agreed amount periodically and where the lessee becomes 
the owner of the such assets at the expiry of the term of lease or on payment of the agreed residual 
amount, as the case may be;] 

(n) “hypothecation” means a charge in or upon any movable property, existing or future, created 
by a borrower in favour of a secured creditor without delivery of possession of the movable property 
to such creditor, as a security for financial assistance and includes floating charge and crystallization 
of such charge into fixed charge on movable property; 

1[(na) “negotiable document” means a document, which embodies a right to delivery of tangible 
assets  and  satisfies  the  requirements  for  negotiability  under  any  law  for  the  time  being  in  force 
including warehouse receipt and bill of lading;] 

(o) “non-performing asset” means an asset or account of a borrower, which has been classified by 

a bank or financial institution as sub-standard, 2[doubtful or loss asset,— 

(a) in case such bank or financial institution is administered or  regulated by any authority or  
body established, constituted or  appointed by any law for the time being in force, in accordance 
with  the  directions  or  guidelines  relating  to  assets  classifications  issued    by  such  authority  or 
body; 

(b)  in  any  other  case,  in  accordance  with  the  directions  or  guidelines  relating  to  assets 

classifications issued by the Reserve Bank]; 

(p) “notification” means a notification published in the Official Gazette; 

(q) “obligor”  means  a person  liable to the  originator,  whether under  a  contract or  otherwise, to 
pay a financial asset or to discharge any obligation in respect of a financial asset, whether existing, 
future, conditional or contingent and includes the borrower; 

(r) “originator” means the owner of a financial asset which is acquired by a 3[asset reconstruction 

company] for the purpose of securitisation or asset reconstruction; 

(s) “prescribed” means prescribed by rules made under this Act; 

(t) “property” means— 

(i) immovable property;  

(ii) movable property; 

(iii) any debt or any right to receive payment of money, whether secured or unsecured; 

(iv) receivables, whether existing or future; 

(v) intangible assets, being know-how, patent, copyright, trade mark, licence, franchise or any 
other  business  or  commercial  right  of  similar  nature1[as  may  be  prescribed  by  the  Central 
Government in consultation with Reserve Bank]; 

(u)  “4[qualified  buyer]”  means  a  financial  institution,  insurance  company,  bank,  state 
financial corporation, state industrial development corporation,  2[trustee or  3[asset reconstruction 
company] which has been granted a certificate of registration under sub-section (4) of section 3 or 
any  asset  management  company  making  investment  on  behalf  of  mutual  fund]  or  a  foreign 
institutional  investor  registered  under  the  Securities  and  Exchange  Board  of  India  Act,  1992  
(15 of 1992) or regulations made thereunder,1[any category of non-institutional investors as may 

1. Ins. by Act 44 of 2016, s. 4 (w.e.f. 1-9-2016). 
2. Subs. by Act 30 of 2004, s. 2, for certain words (w.e.f. 11-11-2004). 
3. Subs. by Act 44 of 2016, s. 3, for “securitisation company or reconstruction company” (w.e.f. 1-9-2016). 
4. Subs. by s. 3, ibid., for “qualified institutional buyer” (w.e.f. 1-9-2016). 

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be specified by the Reserve Bank under sub-section (1) of section 7] or any other body corporate 
as may be specified by the Board; 
1* 
(w)  “Registrar  of  Companies”  means  the  Registrar  defined  in  clause  (40)  of  section  2  of  the 

* 

* 

* 

* 

Companies Act, 1956 (1 of 1956); 

(x) “Reserve Bank” means the Reserve Bank of India constituted under section 3 of the Reserve 

Bank of India Act, 1934 (2 of 1934); 

(y) “scheme” means a scheme inviting subscription to security receipts proposed to be issued by a 

2[asset reconstruction company] under that scheme; 

(z) “securitisation” means acquisition of financial assets by any  2[asset reconstruction company] 
from  any  originator,  whether  by  raising  of  funds  by  such  2[asset  reconstruction  company]  from 
3[qualified buyers] by issue of security receipts representing undivided interest in such financial assets 
or otherwise; 

* 

1* 
(zb) “security agreement” means an agreement, instrument or any other document or arrangement 
under  which  security  interest  is  created  in  favour  of  the  secured  creditor  including  the  creation  of 
mortgage by deposit of title deeds with the secured creditor; 

* 

* 

* 

(zc) “secured asset” means the property on which security interest is created; 
4[(zd) “secured creditor” means— 

(i)  any  bank  or  financial  institution  or  any  consortium  or  group  of  banks  or  financial 
institutions  holding  any  right,  title  or  interest  upon  any  tangible  asset  or  intangible  asset  as 
specified in clause (l); 

(ii) debenture trustee appointed by any bank or financial institution; or 
(iii)  an  asset  reconstruction  company  whether  acting  as  such  or  managing  a  trust  set  up  by 
such asset reconstruction company for the securitisation or reconstruction, as the case may be; or 
(iv) debenture trustee registered with  5[the Board and appointed] for secured debt securities; 

or 

(v) any other trustee holding securities on behalf of a bank or financial institution, 

in  whose  favour  security  interest  is  created  by  any  borrower  for  due  repayment  of  any  financial 
assistance.] 

(ze) “secured debt” means a debt which is secured by any security interest; 
6[(zf)  “security  interest”  means  right,  title  or  interest  of  any  kind,  other  than  those  specified  in 

section 31, upon property created in favour of any secured creditor and includes— 

(i) any mortgage, charge, hypothecation, assignment or any right, title or interest of any kind, 
on tangible asset, retained by the secured creditor as an owner of the property, given on hire or 
financial lease or conditional sale or under any other contract which secures the obligation to pay 
any unpaid portion of the purchase price of the asset or an obligation incurred or credit provided 
to enable the borrower to acquire the tangible asset; or 

1. Omitted by Act 44 of 2016, s. 4 (w.e.f. 1-9-2016). 
2. Subs. by s. 3, ibid.,for “securitisation company or reconstruction company” (w.e.f. 1-9-2016). 
3. Subs. by s. 3, ibid., for “qualified institutional buyers” (w.e.f. 1-9-2016). 
4. Subs. by s. 4, ibid., for clause (zd) (w.e.f. 1-9-2016). 
5. Subs. by Act 13 of 2021, s. 162, for “the Board appointed by any company” (w.e.f. 1-4-2021). 
6. Subs. by Act 44 of 2016, s. 4, for clause (zf) (w.e.f. 1-9-2016). 

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(ii)  such  right,  title  or  interest  in  any  intangible  asset  or  assignment  or  licence  of  such 
intangible asset which secures the obligation to pay any unpaid portion of the purchase price of 
the  intangible  asset  or  the  obligation  incurred  or  any  credit  provided  to  enable  the  borrower  to 
acquire the intangible asset or licence of intangible asset;] 
(zg)  “security  receipt”  means  a  receipt  or  other  security,  issued  by  a  1[asset  reconstruction 
company]  to any 2[qualified buyer] pursuant to a scheme, evidencing the purchase or acquisition by 
the  holder  thereof,  of  an  undivided  right,  title  or  interest  in  the  financial  asset  involved  in 
securitisation; 

 (zh) “sponsor” means any person holding not less than ten per cent. of the paid-up equity capital 

of a 1[asset reconstruction company]; 

(zi) “State Bank of India” means the State Bank of India constituted under section 3 of the State 

Bank of India Act, 1955 (23 of 1955); 

(zj) “subsidiary bank” shall have the meaning assigned to it in clause (k) of section 2 of the State 

Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959). 

(2) Words and expressions used and not defined in this Act but defined in the Indian Contract Act, 
1872  (9  of  1872)  or  the  transfer  of  Property  Act,  1882  (4  of  1882)  or  the  Companies  Act,  1956  
(1  of  1956) or the  Securities  and  Exchange  Board  of  India  Act 1992  (15  of 1992)  shall  have  the  same 
meanings respectively assigned to them in those Acts. 

CHAPTER II 

REGULATION OF SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETSOF BANKSAND 
FINANCIAL INSTITUTIONS 

3.  Registration  of  3[asset  reconstruction  companies].—(1)  No  1[asset  reconstruction  company] 

shall commence or carry on the business of securitisation or asset reconstruction without— 

(a) obtaining a certificate of registration granted under this section; and 
4[(b) having net owned fund of not less than two crore rupees or such other higher amount as the 

Reserve Bank, may, by notification, specify;] 

Provided  that  the  Reserve  Bank  may,  by  notification,  specify  different  amounts  of  owned  fund  for 

different class or classes of 3[asset reconstruction companies]:  

Provided further that a  1[asset reconstruction company], existing on the commencement of this Act, 
shall make an application for registration to the Reserve Bank before the expiry of six months from such 
commencement and notwithstanding anything contained in this sub-section may continue to carry on the 
business of securitisation or asset reconstruction until a certificate of registration is granted to it or, as the 
case may be, rejection of application for registration is communicated to it. 

(2)  Every  1[asset  reconstruction  company]  shall  make  an  application  for  registration  to the  Reserve 

Bank in such form and manner as it may specify. 

(3) The Reserve Bank may, for the purpose of considering the application for registration of a  1[asset 
reconstruction company] to commence or carry on the business of securitisation or asset reconstruction, 
as  the  case  may  be,  require  to  be  satisfied,  by  an  inspection  of  records  or  books  of  such  1[asset 
reconstruction company], or otherwise, that the following conditions are fulfilled, namely:— 

(a) that the 1[asset reconstruction company] has not incurred losses in any of the three preceding 

financial years; 

1. Subs. by Act 44 of 2016, s. 3, for “securitisation company or reconstruction company” (w.e.f. 1-9-2016). 
2. Subs. by s. 3,ibid.,for “qualified institutional buyer” (w.e.f. 1-9-2016). 
3. Subs. bys. 3,ibid., for “securitisation companies or reconstruction companies” (w.e.f. 1-9-2016). 
4. Subs. by s. 5, ibid., for clause (b) (w.e.f. 1-9-2016). 

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(b) that such  1[asset reconstruction company] has made adequate arrangements for realisation of 
the financial assets acquired for the purpose of securitisation or asset reconstruction and shall be able 
to pay periodical returns and redeem on respective due dates on the investments made in the company 
by the 2[qualified buyers] or other persons; 

(c) that the directors of 1[asset reconstruction company] have adequate professional experience in 

matters related to finance, securitisation and reconstruction; 

3* 

* 

* 

* 

* 

(e) that any of its directors has not been convicted of any offence involving moral turpitude; 

4[(f) that a sponsor of an asset reconstruction company is a fit and proper person in accordance 

with the criteria as may be specified in the guidelines issued by the Reserve Bank for such persons;] 

(g)  that1[asset  reconstruction  company]  has  complied  with  or  is  in  a  position  to  comply  with 

prudential norms specified by the Reserve Bank; 

5[(h) that 1[asset reconstruction company] has complied with one or more conditions specified in 

the guidelines issued by the Reserve Bank for the said purpose.]  

(4) The Reserve Bank  may, after being satisfied that the conditions specified in sub-section (3) are 
fulfilled, grant a certificate of registration to the 6[asset reconstruction company] to commence or carry on 
business of securitisation or asset reconstruction, subject to such conditions, which it may consider, fit to 
impose. 

(5) The Reserve Bank may reject the application made under sub-section (2) if it is satisfied that the 

conditions specified in sub-section (3) are not fulfilled: 

Provided that before rejecting the application, the applicant shall be given a reasonable opportunity of 

being heard. 

(6)  Every  1[asset  reconstruction  company]  shall  obtain  prior  approval  of  the  Reserve  Bank  for  any 
substantial change in its management7[including appointment of any director on the board of directors of 
the  asset  reconstruction  company  or  managing  director  or  chief  executive  officer  thereof]  or  change  of 
location of its registered office or change in its name:  

Provided  that  the  decision  of  the  Reserve  Bank,  whether  the  change  in  management  of  a  8[asset 

reconstruction company] is a substantial change in its management or not, shall be final. 

 Explanation.—For the purposes of this section, the expression “substantial change in management” 
means the change in the management by way of transfer of shares or9[change affecting the sponsorship in 
the company by way of transfer of shares or] amalgamation or transfer of the business of the company. 

4.  Cancellation  of  certificate  of  registration.—(1)  The  Reserve  Bank  may  cancel  a  certificate  of 

registration granted to a 8[asset reconstruction company], if such company— 

(a) ceases to carry on the business of securitisation or asset reconstruction; or  

1. Subs. by Act 44 of 2016, s. 3, for “securitisation company or reconstruction company” (w.e.f. 1-9-2016). 
2. Subs. bys. 3,ibid.,for “qualified institutional buyers” (w.e.f. 1-9-2016). 
3. Omitted by s. 5, ibid. (w.e.f. 1-9-2016). 
4. Subs. by s. 5, ibid., for clause (f) (w.e.f. 1-9-2016). 
5. Ins. by Act 30 of 2004, s. 3 (w.e.f. 11-11-2004). 
6. Subs. by Act 44 of 2016, s. 3, for “securitisation company or the reconstruction company” (w.e.f. 1-9-2016). 
7. Ins. by s. 5, ibid. (w.e.f. 1-9-2016). 
8. Subs. by s. 3, ibid., for “securitisation company or a reconstruction company” (w.e.f. 1-9-2016). 
9. Ins. by s. 5, ibid. (w.e.f. 1-9-2016). 

10 

 
 
 
 
 
 
 
 
                                                           
(b) ceases to receive or hold any investment from a 1[qualified buyer]; or 

(c)  has failed to  comply  with any  conditions  subject to  which  the  certificate of registration  has 

been granted to it; or 

(d) at any time fails to fulfil any of the conditions referred to in clauses (a) to (g) of sub-section 

(3) of section 3; or 

(e) fails to— 

(i) comply with any direction issued by the Reserve Bank under the provisions of this Act; or 

(ii)  maintain  accounts  in  accordance  with  the  requirements  of  any  law  or  any  direction  or 

order issued by the Reserve Bank under the provisions of this Act; or 

(iii) submit or offer for inspection its books of account or other relevant documents when so 

demanded by the Reserve Bank; or  

(iv) obtain prior approval of the Reserve Bank required under sub-section (6) of section 3: 

Provided  that  before  cancelling  a  certificate  of  registration  on  the  ground  that  the  2[asset 
reconstruction company]  has failed to comply with the provisions of clause (c) or has failed to fulfil any 
of the conditions referred to in clause (d) or sub-clause (iv) of clause (e), the Reserve Bank, unless it is of 
the  opinion 
registration  granted  under  
sub-section (4) of section 3 shall be prejudicial to the public interest or the interests of the investors or the 
3[asset reconstruction company], shall give an opportunity to such company on such terms as the Reserve 
Bank  may  specify  for  taking  necessary  steps  to  comply  with  such  provisions  orfulfilment  of  such 
conditions. 

the  certificate  of 

in  cancelling 

the  delay 

that 

(2)  A  2[asset  reconstruction  company]  aggrieved  by  the  order  of  4***  cancellation  of  certificate  of 
registration may prefer an appeal, within a period of thirty days  from the date on which  5[such order of 
cancellation] is communicated to it, to the Central Government: 

Provided  that  before  rejecting  an  appeal  such  company  shall  be  given  a  reasonable  opportunity  of 

being heard. 

(3) A 2[asset reconstruction company], which is holding investments of 6[qualified buyers] and whose 
application for grant of certificate of registration has been rejected or certificate of registration has been 
cancelled  shall,  notwithstanding  such rejection  or  cancellation  be  deemed  to  be  a  2[asset  reconstruction 
company]  until  it  repays  the  entire  investments  held  by  it  (together  with  interest,  if  any)  within  such 
period as the Reserve Bank may direct. 

5. Acquisition of rights or interest in financial assets.—(1) Notwithstanding anything contained in 
any  agreement  or  any  other  law  for  the  time  being  in  force,  any  2[asset  reconstruction  company]  may 
acquire financial assets of any bank or financial institution— 

(a)  by  issuing  a  debenture  or  bond  or  any  other  security  in  the  nature  of  debenture,  for 
consideration agreed upon between such company and the bank or financial institution, incorporating 
therein such terms and conditions as may be agreed upon between them; or  

1. Subs. by Act 44 of 2016, s. 3, for “qualified institutional buyer” (w.e.f. 1-9-2016). 
2. Subs. by s. 3,ibid.,for “securitisation company or reconstruction company” (w.e.f. 1-9-2016). 
3. Subs. by s. 3, ibid., for “securitisation company or the reconstruction company” (w.e.f. 1-9-2016). 
4. The words “rejection of application for registration or” omitted by Act 30 of 2004, s. 4 (w.e.f. 11-11-2004). 
5. Subs. bys. 4,ibid.,for “such order of rejection or cancellation” (w.e.f. 11-11-2004). 
6. Subs. by Act 44 of 2016, s. 3,for “qualified institutional buyers” (w.e.f. 1-9-2016). 

11 

 
                                                           
(b) by entering into an agreement with such bank or financial institution for the transfer of such 
financial assets to such company on such terms and conditions as may be agreed upon between them. 

1[(1A) Any document executed by any bank or financial institution under sub-section (1) in favour of 
the  asset  reconstruction  company  acquiring  financial  assets  for  the  purposes  of  asset  reconstruction  or 
securitisation shall be exempted from stamp duty in accordance with the provisions of section 8F of the 
Indian Stamp Act, 1899 (2 of 1899): 

Provided that the provisions of this sub-section shall not apply where the acquisition of the financial 
assets  by  the  asset  reconstruction  company  is  for  the  purposes  other  than  asset  reconstruction  or 
securitisation.] 

(2)  If  the  bank  or  financial  institution  is  a  lender  in  relation  to  any  financial  assets  acquired  under  
sub-section  (1)  by  the  2[asset  reconstruction  company],  such  3[asset  reconstruction  company]  shall,  on 
such acquisition, be deemed to be the lender and all the rights of such bank or financial institution shall 
vest in such company in relation to such financial assets. 

1[(2A) If the bank or financial institution is holding any right, title or interest upon any tangible asset 
or  intangible  asset  to  secure  payment  of  any  unpaid  portion  of  the  purchase  price  of  such  asset  or  an 
obligation incurred  or  credit  otherwise  provided  to  enable the borrower to  acquire  the  tangible  asset or 
assignment or licence of intangible asset, such right, title or interest shall vest in the asset reconstruction 
company on acquisition of such assets under sub-section (1).] 

(3) Unless otherwise expressly provided by this Act, all contracts, deeds, bonds, agreements, powers-
of-attorney,  grants  of  legal  representation,  permissions,  approvals,  consents  or  no-objections  under  any 
law  or  otherwise  and  other  instruments  of  whatever  nature  which  relate  to  the  said  financial  asset  and 
which  are  subsisting  or  having  effect  immediately  before  the  acquisition  of  financial  asset  under  
sub-section (1) and to which the concerned bank or financial institution is a party or which are in favour 
of such bank or financial institution shall, after the acquisition of the financial assets, be of as full force 
and effect against or in favour of the  3[asset reconstruction company], as the case may be, and  may be 
enforced or acted upon as fully and effectually as if, in the place of the said bank or financial institution, 
3[asset reconstruction company], as the case may be, had been a party thereto or as if they had been issued 
in favour of 3[asset reconstruction company], as the case may be. 

(4)  If,  on  the  date  of  acquisition  of  financial  asset  under  sub-section  (1),  any  suit,  appeal  or  other 
proceeding  of  whatever  nature  relating  to  the  said  financial  asset  is  pending  by  or  against  the  bank  or 
financial  institution,  save  as  provided  in  the  third  proviso  to  sub-section  (1)  of  section  15  of  the  Sick 
Industrial  Companies  (Special  Provisions)  Act,  1985  (1  of  1986)  the  same  shall  not  abate,  or  be 
discontinued  or  be, in any way,  prejudicially  affected  by  reason  of  the acquisition  of  financial  asset  by 
the3[asset reconstruction company], as the case may be, but the suit, appeal or other proceeding may be 
continued, prosecuted and enforced by or against the 3[asset reconstruction company], as the case may be. 

4[(5)  On  acquisition  of  financial  assets  under  sub-section  (1),  the  3[asset  reconstruction  company], 
may  with  the  consent  of  the  originator,  file  an  application  before  the  Debts  Recovery  Tribunal  or  the 
Appellate  Tribunal  or  any  court  or  other  Authority  for  the  purpose  of  substitution  of  its  name  in  any 
pending  suit,  appeal  or  other  proceedings  and  on  receipt  of  such  application,  such  Debts  Recovery 
Tribunal or the Appellate Tribunal or court or Authority shall pass orders for the substitution of the 3[asset 
reconstruction company]in such pending suit, appeal or other proceedings.] 

1. Ins. by Act 44 of 2016, s. 6 (w.e.f. 1-9-2016). 
2. Subs. by s. 3, ibid., for “securitisation company or the reconstruction company” (w.e.f. 1-9-2016). 
3. Subs. by s. 3, ibid., for “securitisation company or reconstruction company” (w.e.f. 1-9-2016). 
4. Ins. by Act 1 of 2013, s. 3 (w.e.f. 15-1-2013). 

12 

 
                                                           
1[5A.Transfer  of  pending  applications  to  any  one  of  Debts  Recovery  Tribunals  in  certain 
cases.—(1) If any financial asset, of a borrower acquired by a  2[asset reconstruction company], comprise 
of  secured  debts  of  more  than  one  bank  or  financial  institution  for  recovery  of  which  such  banks  or 
financial  institutions  has  filed  applications  before  two  or  more  Debts  Recovery  Tribunals  the  2[asset 
reconstruction company]may file an application to the Appellate Tribunal having jurisdiction over any of 
such Tribunals in which such applications are pending for transfer of all pending applications to any one 
of the Debts Recovery Tribunals as it deems fit. 

(2) On receipt of such application for transfer of all pending applications under sub-section (1), the 
Appellate Tribunal may, after giving the parties to the application an opportunity of being heard, pass an 
order for transfer of the pending applications to any one of the Debts Recovery Tribunals. 

(3)  Notwithstanding  anything  contained  in  the  Recovery  of  Debts  Due  to  Banks  and  Financial 
Institutions  Act,  1993  (51  of  1993),  any  order  passed  by  the  Appellate  Tribunal  under  sub-section  (2) 
shall be binding on all the Debts Recovery Tribunals referred to in sub-section (1) as if such order had 
been passed by the Appellate Tribunal having jurisdiction on each such Debts Recovery Tribunal. 

(4)  Any  recovery  certificate,  issued  by  the  Debts  Recovery  Tribunal  to  which  all  the  pending 
applications  are  transferred  under  sub-section(2),  shall  be  executed  in  accordance  with  the  provisions 
contained in sub-section (23) of section 19 and other provisions of the Recovery of Debts Due to Banks 
and Financial Institutions Act, 1993 (51 of 1993)shall, accordingly, apply to such execution.]  

6.  Notice  to  obligor  and  discharge  of  obligation  of  such  obligor.—(1)  The  bank  or  financial 
institution may, if it considers appropriate, give a notice of acquisition of financial assets by any  2[asset 
reconstruction company], to the concerned obligor and any other concerned person and to the concerned 
registering  authority  (including  Registrar  of  Companies)  in  whose  jurisdiction  the  mortgage,  charge, 
hypothecation, assignment or other interest created on the financial assets had been registered. 

(2)  Where  a  notice  of  acquisition  of  financial  asset  under  sub-section  (1)  is  given  by  a  bank  or 
financial institution, the obligor, on receipt of such notice, shall make payment to the concerned  2[asset 
reconstruction company], as the case may be, and payment made to such company in discharge of any of 
the  obligations  in  relation  to  the  financial  asset  specified  in  the  notice  shall  be  a  full  discharge  to  the 
obligor making the payment from all liability in respect of such payment. 

(3)  Where  no  notice  of  acquisition  of  financial asset  under sub-section (1)  is  given  by  any  bank  or 
financial  institution,  any  money  or  other  properties  subsequently  received  by  the  bank  or  financial 
institution, shall constitute monies or properties held in trust for the benefit of and on behalf of the 2[asset 
reconstruction  company],  as  the  case  may  be,  and  such  bank  or  financial  institution  shall  hold  such 
payment or property which shall forthwith be made over or delivered to  2[asset reconstruction company], 
as the case may be, or its agent duly authorised in this behalf. 

7.  Issue  of  security  by  raising  of  receipts  or  funds  by  2[asset  reconstruction  company].—(1) 
Without  prejudice  to  the  provisions  contained  in  the  Companies  Act,  1956  (1  of  1956),  the  Securities 
Contracts (Regulation) Act, 1956 (42 of 1956) and the Securities and Exchange Board of India Act, 1992 
(15 of 1992), any 2[asset reconstruction company], may, after acquisition of any financial asset under sub-
section  (1)  of  section  5,  offer  security  receipts  to  qualified  institute  buyers  3[or  such  other  category  of 
investors including  non-institutional investors  as  may  be specified  by  the  Reserve  Bank  in  consultation 
with the Board, from time to time,] for subscription in accordance with the provisions of those Acts. 

1. Ins. by Act 30 of 2004, s. 5 (w.e.f. 11-11-2004). 
2. Subs. by Act 44 of 2016, s. 3, for “securitisation company or reconstruction company” (w.e.f. 1-9-2016). 
3. Subs. by s. 7, ibid., for “(other than by offer to public)” (w.e.f. 1-9-2016). 

13 

 
                                                           
(2)  A  1[asset  reconstruction  company]  may  raise  funds  from  the  2[qualified  buyers]  by  formulating 
schemes  for  acquiring  financial  assets  and  shall  keep  and  maintain  separate  and  distinct  accounts  in 
respect of each such scheme for every financial asset acquired out of investments made by a  3[qualified 
buyer]  and  ensure  that  realisations  of  such  financial  asset  is  held  and  applied  towards  redemption  of 
investments and payment of returns assured on such investments under the relevant scheme. 

4[(2A)  (a) The scheme  for  the  purpose  of  offering  security  receipts  under sub-section (1)  or  raising 
funds under sub-section (2), may be in the nature of a trust to be managed by the  1[asset reconstruction 
company], and the 1[asset reconstruction company] shall hold the assets so acquired or the funds so raised 
for acquiring the assets, in trust for the benefit of the  2[qualified buyers] holding the security receipts or 
from whom the funds are raised. 

(b)  The  provisions  of  the  Indian  Trusts  Act,  1882  (2  of  1882)  shall,  except  in  so  far  as  they  are 
inconsistent with the provisions of this Act, apply with respect to the trust referred to in clause (a) above.] 

(3) In the event of non-realisation under sub-section (2) of financial assets, the 2[qualified buyers] of a 
1[asset  reconstruction  company],  holding  security  receipts  of  not  less  than  seventy-five  per  cent.  of  the 
total value of the  5[security receipts issued under a scheme by such company], shall be entitled to call a 
meeting of all the 2[qualified buyers] and every resolution passed in such meeting shall be binding on the 
company. 

(4)  The  2[qualified  buyers]  shall,  at  a  meeting  called  under  sub-section  (3),  follow  the  same 
procedure,  as  nearly  as  possible  as  is  followed  at  meetings  of  the  board  of  directors  of  the  1[asset 
reconstruction company], as the case may be. 

8.  Exemption  from  registration  of  security  receipt.—Notwithstanding  anything  contained  in  

sub-section (1) of section 17 of the Registration Act, 1908 (16 of 1908),— 

(a) any security receipt issued by the  1[asset reconstruction company], as the case may be, under 
sub-section (1) of section 7, and not creating, declaring, assigning, limiting or extinguishing any right, 
title or interest, to or in immovable property except in so far as it entitles the holder of the security 
receipt to an undivided interest afforded by a registered instrument; or 

(b) any transfer of security receipts, shall not require compulsory registration. 

6[9. Measures for assets reconstruction.—(1)Without prejudice to the provisions contained in any 
other  law  for  the  time  being  in  force,  an  asset  reconstruction  company  may,  for  the  purposes  of  asset 
reconstruction, provide for any one or more of the following measures, namely:— 

(a)  the  proper  management  of  the  business  of  the  borrower,  by  change  in,  or  take  over  of,  the 

management of the business of the borrower; 

(b) the sale or lease of a part or whole of the business of the borrower; 

(c) rescheduling of payment of debts payable by the borrower; 

(d) enforcement of security interest in accordance with the provisions of this Act; 

(e) settlement of dues payable by the borrower; 

(f) taking possession of secured assets in accordance with the provisions of this Act; 

(g) conversion of any portion of debt into shares of a borrower company: 

1. Subs. by Act 44 of 2016, s. 3, for “securitisation company or reconstruction company” (w.e.f. 1-9-2016). 
2. Subs. by s. 3, ibid., for “qualified institutional buyers” (w.e.f. 1-9-2016). 
3. Subs. by s. 3, ibid., for “qualified institutional buyer” (w.e.f. 1-9-2016). 
4. Ins. by Act 30 of 2004, s. 6 (w.e.f. 11-11-2004). 
5. Subs. by s. 6, ibid., for “security receipts issued by such company” (w.e.f. 11-11-2004). 
6. Subs. by Act 44 of 2016, s. 8, for section 9 (w.e.f. 1-9-2016). 

14 

 
 
                                                           
Provided  that  conversion  of  any  part  of  debt  into  shares  of  a  borrower  company  shall  be  deemed 

always to have been valid, as if the provisions of this clause were in force at all material times. 

(2)  The  Reserve  Bank  shall,  for  the  purposes  of  sub-section  (1),  determine  the  policy  and  issue 
necessary directions including the direction for regulation of management of the business of the borrower 
and fees to be charged. 

(3) The asset reconstruction company shall take measures under sub-section (1) in accordance with 

policies and directions of the Reserve Bank determined under sub-section (2).] 

10. Other functions of 1[asset reconstruction company].—(1) Any 1[asset reconstruction company] 

registered under section 3 may— 

(a) act as an agent for any bank or financial institution for the purpose of recovering their dues 
from the borrower on payment of such fees or charges as may be mutually agreed upon between the 
parties; 

(b) act as a manager referred to in clause (c) of sub-section (4) of section 13 on such fee as may 

be mutually agreed upon between the parties; 

(c) act as receiver if appointed by any court or tribunal: 

Provided that no 1[asset reconstruction company] shall act as a manager if acting as such gives rise to 

any pecuniary liability. 

(2) Save as otherwise provided in sub-section (1), no 1[asset reconstruction company] which has been 
granted  a  certificate  of  registration  under  sub-section  (4)  of  section  3,  shall  commence  or  carry  on, 
without  prior  approval  of  the  Reserve  Bank,  any  business  other  than  that  of  securitisation  or  asset 
reconstruction: 

Provided  that  a  1[asset  reconstruction  company]  which  is  carrying  on,  on  or  before  the 
commencement of this Act, any business other than the business of securitisation or asset reconstruction 
or business referred to in sub-section (1), shall cease to carry on any such business within one year from 
the date of commencement of this Act. 

Explanation.—For  the  purposes  of  this  section,  “2[asset  reconstruction  company]''  or  “3[asset 

reconstruction company]'' does not include its subsidiary. 

11. Resolution of disputes.—Where any dispute relating to securitisation or reconstruction or non-
payment  of  any  amount  due  including  interest  arises  amongst  any  of  the  parties,  namely,  the  bank,  or 
financial institution, or 1[asset reconstruction company] or 4[qualified buyer], such dispute shall be settled 
by conciliation or arbitration as provided in the Arbitration and Conciliation Act, 1996 (26 of 1996), as if 
the parties to the dispute have consented in writing for determination of such dispute by conciliation or 
arbitration and the provisions of that Act shall apply accordingly. 

12. Power of Reserve Bank to determine policy and issue directions.—(1) If the Reserve Bank is 
satisfied  that  in  the  public  interest  or  to  regulate  financial  system  of  the  country  to  its  advantage  or  to 
prevent the affairs of any 1[asset reconstruction company] from being conducted in a manner detrimental 
to  the  interest  of  investors  or  in  any  manner  prejudicial  to  the  interest  of  such  1[asset  reconstruction 
company], it is necessary or expedient so to do, it may determine the policy and give directions to all or 
any  1[asset  reconstruction  company]  in  matters  relating  to  income  recognition,  accounting  standards, 
making provisions for bad and doubtful debts, capital adequacy based on risk weights for assets and also 

1. Subs. by Act 44 of 2016, s. 3, for “securitisation company or reconstruction company” (w.e.f. 1-9-2016). 
2. Subs. by s. 3,ibid.,for “securitisation company” (w.e.f. 1-9-2016). 
3. Subs. by s. 3,ibid.,for “reconstruction company” (w.e.f. 1-9-2016). 
4. Subs. by s. 3, ibid., for “qualified institutional buyer” (w.e.f. 1-9-2016). 

15 

 
                                                           
relating  to  deployment  of  funds  by  the  1[asset  reconstruction  company],  as  the  case  may  be,  and  such 
company shall be bound to follow the policy so determined and the directions so issued. 

(2) Without prejudice to the generality of the power vested under sub-section (1), the Reserve Bank 
may give directions to any 1[asset reconstruction company] generally or to a class of 2[asset reconstruction 
companies] or to any 1[asset reconstruction company] in particular as to— 

 (a)  the  type  of  financial  asset  of  a  bank  or  financial  institution  which  can  be  acquired  and 

procedure for acquisition of such assets and valuation thereof; 

(b) the aggregate value of financial assets which may be acquired by any  1[asset reconstruction 

company]. 

3[(c)  the  fee  and  other  charges  which  may  be  charged  or  incurred  for  management  of  financial 

assets acquired by any asset reconstruction company; 

(d) transfer of security receipts issued to qualified buyers.] 

4[12A. Power of Reserve Bank to call for statements and information.—The Reserve Bank may 
at any time direct a 1[asset reconstruction company] to furnish it within such time as may be specified by 
the Reserve Bank, with such statements and information relating to the business or affairs of such  1[asset 
reconstruction company](including any business or affairs with which such company is concerned) as the 
Reserve Bank may consider necessary or expedient to obtain for the purposes of this Act.] 

5[12B. Power of Reserve Bank to carry out audit and inspection.—(1) The Reserve Bank may, for 
the  purposes  of  this  Act,  carry  out  or  caused  to  be  carried  out  audit  and  inspection  of  an  asset 
reconstruction company from time to time. 

(2) It shall be the duty of an asset reconstruction company and its officers to provide assistance and 

cooperation to the Reserve Bank to carry out audit or inspection under sub-section (1). 

(3) Where on audit or inspection or otherwise, the Reserve Bank is satisfied that business of an asset 
reconstruction company is being conducted in a manner detrimental to public interest or to the interests of 
investors  in  security  receipts  issued  by  such  asset  reconstruction  company,  the  Reserve  Bank  may,  for 
securing proper management of an asset reconstruction company, by an order— 

(a) remove the Chairman or any director or appoint additional directors on the board of directors 

of the asset reconstruction company; or 

(b) appoint any of its officers as an observer to observe the working of the board of directors of 

such asset reconstruction company: 

Provided  that  no  order  for  removal  of  Chairman  or  director  under  clause  (a)  shall  be  made  except 

after giving him an opportunity of being heard. 

(4)  It  shall  be  the  duty  of  every  director  or  other  officer  or  employee  of  the  asset  reconstruction 
company to produce before the person, conducting an audit or inspection under sub-section (1), all such 
books, accounts and other documents in his custody or control and to provide him such statements and 
information relating to the affairs of the asset reconstruction company as may be required by such person 
within the stipulated time specified by him.] 

1. Subs. by Act 44 of 2016, s. 3, for “securitisation company or reconstruction company” (w.e.f. 1-9-2016). 
2. Subs. by s. 3, ibid., for “securitisation companies or reconstruction companies” (w.e.f. 1-9-2016). 
3. Ins. by s. 9, ibid. (w.e.f. 1-9-2016). 
4. Ins. by Act 30 of 2004, s. 7 (w.e.f. 11-11-2004). 
5. Ins. by Act 44 of 2016, s. 10 (w.e.f. 1-9-2016). 

16 

 
                                                           
CHAPTER III 

ENFORCEMENT OF SECURITY INTEREST 

13.  Enforcement  of  security  interest.—(1)  Notwithstanding  anything  contained  in  section  69  or 
section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of 
any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in 
accordance with the provisions of this Act. 

(2)  Where  any  borrower,  who  is  under  a  liability  to  a  secured  creditor  under  a  security  agreement, 
makes any default in repayment of secured debt or any instalment thereof, and his account in respect of 
such  debt  is  classified  by  the  secured  creditor  as  non-performing  asset,  then,  the  secured  creditor  may 
require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within 
sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any 
of the rights under sub-section (4). 

1[Provided that— 

(i)  the  requirement  of  classification  of  secured  debt  as  non-performing  asset  under  this  

sub-section shall not apply to a borrower who has raised funds through issue of debt securities; and 

(ii) in the event of default, the debenture trustee shall be entitled to enforce security interest in the 
same  manner  as  provided  under  this  section  with  such  modifications  as  may  be  necessary  and  in 
accordance with the terms and conditions of security documents executed in favour of the debenture 
trustee.] 

(3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower 
and  the  secured  assets  intended  to  be  enforced  by  the  secured  creditor  in  the  event  of  non-payment  of 
secured debts by the borrower. 

2[(3A)  If,  on  receipt  of  the  notice  under  sub-section  (2),  the  borrower  makes  any  representation  or 
raises any objection, the secured creditor shall consider such representation or objection and if the secured 
creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall 
communicate  3[within  fifteen  days]  of  receipt  of  such  representation  or  objection  the  reasons  for  non-
acceptance of the representation or objection to the borrower: 

Provided that the reasons so communicated or the likely action of the secured creditor at the stage of 
communication  of  reasons  shall  not  confer  any  right  upon  the  borrower  to  prefer  an  application  to  the 
Debts Recovery Tribunal under section 17 or the Court of District Judge under section 17A.] 

(4)  In  case  the  borrower  fails  to  discharge  his  liability  in  full  within  the  period  specified  in  
sub-section  (2),  the  secured  creditor  may  take  recourse  to  one  or  more  of  the  following  measures  to 
recover his secured debt, namely:— 

(a) take possession of the secured assets of the borrower including the right to transfer by way of 

lease, assignment or sale for realising the secured asset; 

4[(b) take over the management of the business of the borrower including the right to transfer by 

way of lease, assignment or sale for realising the secured asset: 

1. Ins. by Act 44 of 2016, s. 11 (w.e.f. 1-9-2016). 
2. Ins. by Act 30 of 2004, s. 8(w.e.f. 11-11-2004). 
3. Subs. by Act 1 of 2013, s. 5, for “within one week” (w.e.f. 15-1-2013). 
4. Subs. by Act 30 of 2004, s. 8, for clause (b) (w.e.f. 11-11-2004). 

17 

 
                                                           
Provided  that  the  right  to  transfer  by  way  of  lease,  assignment  or  sale  shall  be  exercised  only 

where the substantial part of the business of the borrower is held as security for the debt: 

Provided further that where the management of whole of the business or part of the business is 
severable,  the  secured  creditor  shall  take  over  the  management  of  such  business  of  the  borrower 
which is relatable to the security for the debt;] 

(c)  appoint  any  person  (hereafter  referred  to  as  the manager),  to  manage  the  secured  assets  the 

possession of which has been taken over by the secured creditor; 

(d)  require  at  any  time  by  notice  in  writing,  any  person  who  has  acquired  any  of  the  secured 
assets from the borrower and from whom any money is due or may become due to the borrower, to 
pay the secured creditor, so much of the money as is sufficient to pay the secured debt. 

(5)  Any  payment  made  by  any  person  referred  to  in  clause  (d)  of  sub-section  (4)  to  the  secured 

creditor shall give such person a valid discharge as if he has made payment to the borrower. 

1[(5A)  Where the  sale  of  an  immovable  property,  for which  a reserve  price  has been  specified,  has 
been postponed for want of a bid of an amount not less than such reserve price, it shall be lawful for any 
officer  of  the  secured  creditor,  if  so  authorised  by  the  secured  creditor  in  this  behalf,  to  bid  for  the 
immovable property on behalf of the secured creditor at any subsequent sale. 

(5B) Where the secured creditor, referred to in sub-section (5A), is declared to be the purchaser of the 
immovable property at any subsequent sale, the amount of the purchase price shall be adjusted towards 
the amount of the claim of the secured creditor for which the auction of enforcement of security interest is 
taken by the secured creditor, under sub-section (4) of section 13. 

(5C) The provisions of section 9 of the Banking Regulation Act, 1949 (10 of 1949) shall, as far as 

may be, apply to the immovable property acquired by secured creditor under sub-section (5A).] 

(6) Any transfer of secured asset after taking possession thereof or take  over of management under 
sub-section (4), by the secured creditor or by the manager on behalf of the secured creditor shall vest in 
the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made 
by the owner of such secured asset. 

(7) Where any action has been taken against a borrower under the provisions of sub-section (4), all 
costs, charges and expenses which, in the opinion of the secured creditor, have been properly incurred by 
him or any expenses incidental thereto, shall be recoverable from the borrower and the money which is 
received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in 
trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of 
the  dues  of  the  secured  creditor  and  the  residue  of  the  money  so  received  shall  be  paid  to  the  person 
entitled thereto in accordance with his rights and interests. 

2[(8) Where the amount of dues of the secured creditor together with all costs, charges and expenses 
incurred by him is tendered to the secured creditor at any time before the date of publication of notice for 
public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, 
assignment or sale of the secured assets,— 

(i) the secured assets shall not be transferred by way of lease assignment or sale by the secured 

creditor; and  

1. Ins. by Act 1 of 2013, s. 5 (w.e.f. 15-1-2013). 
2. Subs. by Act 44 of 2016, s. 11, for sub-section (8) (w.e.f. 1-9-2016). 

18 

 
 
                                                           
(ii)  in  case,  any  step  has  been  taken  by  the  secured  creditor  for  transfer  by  way  of  lease  or 
assignment  or sale  of the assets  before tendering  of such  amount  under this  sub-section,  no further 
step shall be taken by such secured creditor for transfer by way of lease or assignment or sale of such 
secured assets.] 

(9) 1[Subject to the provisions of the Insolvency and Bankruptcy Code, 2016, in the case of] financing 
of a financial asset by more than one secured creditors or joint financing of a financial asset by secured 
creditors, no secured creditor shall be entitled to exercise any or all of the rights conferred on him under 
or  pursuant  to  sub-section  (4)  unless  exercise  of  such  right  is  agreed  upon  by  the  secured  creditors 
representing  not  less  than  2[sixty  per  cent.]  in  value  of the  amount  outstanding  as  on  a  record  date  and 
such action shall be binding on all the secured creditors: 

Provided that in the case of a company in liquidation, the amount realised from the sale of secured 
assets shall be distributed in accordance with the provisions of section 529A of the Companies Act, 1956 
(1 of 1956): 

Provided further that in the case of a company being wound up on or after the commencement of this 
Act, the  secured creditor  of  such company,  who  opts  to  realise  his  security  instead  of relinquishing  his 
security and proving his debt under proviso to sub-section (1) of section 529 of the Companies Act, 1956 
(1 of 1956), may retain the sale proceeds of his secured assets after depositing the workmen's dues with 
the liquidator in accordance with the provisions of section 529A of that Act: 

Provided also that liquidator referred to in the second proviso shall intimate the secured creditor the 
workmen's  dues  in  accordance  with  the  provisions  of  section  529A  of  the  Companies  Act,  1956  (1  of 
1956) and in case such workmen's dues cannot be ascertained, the liquidator shall intimate the estimated 
amount of workmen's dues under that section to the secured creditor and in such case the secured creditor 
may retain the sale proceeds of the secured assets after depositing the amount of such estimate dues with 
the liquidator: 

Provided also that in case the secured creditor deposits the estimated amount of workmen's dues, such 
creditor shall be liable to pay the balance of the workmen's dues or entitled to receive the excess amount, 
if any, deposited by the secured creditor with the liquidator: 

Provided  also  that  the  secured  creditor  shall  furnish  an  undertaking  to  the  liquidator  to  pay  the 

balance of the workmen's dues, if any. 

Explanation.—For the purposes of this sub-section,— 

(a) “record date” means the date agreed upon by the secured creditors representing not less than 

1[sixty per cent.] in value of the amount outstanding on such date; 

(b)  “amount  outstanding”  shall  include  principal,  interest  and  any  other  dues  payable  by  the 
borrower to the secured creditor in respect of secured asset as per the books of account of the secured 
creditor. 

(10) Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured 
assets, the secured creditor may file an application in the form and manner as may be prescribed to the 
Debts Recovery Tribunal having jurisdiction or a competent court, as the case may be, for recovery of the 
balance amount from the borrower. 

(11) Without prejudice to the rights conferred on the secured creditor under or by this section, secured 
creditor shall be entitled to proceed against the guarantors or sell the pledged assets without first taking 

1. Subs. by Act 31 of 2016, s. 251 and the Seventh Schedule, for “In the case of”  (w.e.f. 15-11-2016). 
2. Subs. by Act 1 of 2013, s. 5, for “three-fourth” (w.e.f. 15-1 -2013). 

19 

 
                                                           
any of the measured specifies in clauses (a) to (d) of sub-section (4) in relation to the secured assets under 
this Act. 

(12) The rights of a secured creditor under this Act may be exercised by one or more of his officers 

authorised in this behalf in such manner as may be prescribed. 

(13) No borrower shall, after receipt of notice referred to in sub-section (2), transfer by way of sale, 
lease or otherwise (other than in the ordinary course of his business) any of his secured assets referred to 
in the notice, without prior written consent of the secured creditor. 

Jammu and Kashmir and Ladakh (UTs).— 

STATE AMENDMENT 

Amendment of section  13.—In sub-section (3A), in proviso thereto, omit “or the Court of District 

Judge under section 17A”. 

[Vide  Order  No.  3807(E)  dated  26th  October,  2020,  the  Union  Territory  of  Jammu  and  Kashmir 
Reorganisation  (Adaptation  of  Central  Laws)  Third  Order,  2020  (w.e.f.  26-10-2020)  and  Vide  Union 
Territory  of  Ladakh  Reorganisation  (Adaptation  of  Central  Laws)  Order,  2020,  notification  No.  S.O. 
3774(E), dated (23-10-2020).] 

14.  Chief  Metropolitan  Magistrate  or  District  Magistrate  to  assist  secured  creditor  in  taking 
possession of secured asset.—(1) Where the possession of any secured assets is required to be taken by 
the  secured  creditor  or  if  any  of  the  secured  assets  is  required  to  be  sold  or  transferred  by  the  secured 
creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or 
control of any such secured assets, request, in writing, the Chief Metropolitan Magistrate or the District 
Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be 
situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or as the case may be, 
the District Magistrate shall, on such request being made to him— 

(a) take possession of such asset and documents relating thereto; and 

(b) forward such asset and documents to the secured creditor: 

1[Provided  that  any  application  by  the  secured  creditor  shall  be  accompanied  by  an  affidavit  duly 

affirmed by the authorised officer of the secured creditor, declaring that— 

(i) the aggregate amount of financial assistance granted and the total claim of the Bank as on the 

date of filing the application; 

(ii)the  borrower  has  created  security  interest  over  various  properties  and  that  the  Bank  or 
Financial  Institution  is  holding  a  valid  and  subsisting  security  interest  over  such  properties  and  the 
claim of the Bank or Financial Institution is within the limitation period; 

(iii)the  borrower  has  created  security  interest  over  various  properties  giving  the  details  of 

properties referred to in sub-clause (ii)above; 

(iv)  the  borrower  has  committed  default  in  repayment  of  the  financial  assistance  granted 

aggregating the specified amount; 

(v)  consequent  upon  such  default  in  repayment  of  the  financial  assistance  the  account  of  the 

borrower has been classified as a non-performing asset; 

(vi) affirming that the period of sixty days notice as required by the provisions of sub-section (2) 
of  section  13,  demanding  payment  of  the  defaulted  financial  assistance  has  been  served  on  the 
borrower; 

1. Ins. by Act 1 of 2013, s. 6 (w.e.f. 15-1-2013). 

20 

 
 
                                                           
(vii) the  objection  or  representation  in reply  to  the  notice  received  from  the  borrower  has  been 
considered by the secured creditor and reasons for non-acceptance of such objection or representation 
had been communicated to the borrower; 

(viii) the borrower has not made any repayment of the financial assistance in spite of the above 
notice and the Authorised Officer is, therefore, entitled to take possession of the secured assets under 
the provisions of sub-section (4) of section 13 read with section 14 of the principal Act; 

(ix) that the provisions of this Act and the rules made thereunder had been complied with: 

Provided further that on receipt of the affidavit from the Authorised Officer, the District Magistrate or 
the Chief Metropolitan Magistrate, as the case may be, shall after satisfying the contents of the affidavit 
pass suitable orders for the purpose of taking possession of the secured assets1[within a period of thirty 
days from the date of application]: 

1[Provided also that if no order is passed by the Chief Metropolitan Magistrate or District Magistrate 
within the said  period  of thirty  days  for  reasons beyond  his control,  he  may,  after recording  reasons  in 
writing for the same, pass the order within such further period but not exceeding in aggregate sixty days.] 

Provided  also  that  the  requirement  of  filing  affidavit  stated  in  the  first  proviso  shall  not  apply  to 
proceeding pending before any District Magistrate or the Chief Metropolitan Magistrate, as the case may 
be, on the date of commencement of this Act.] 

2[(1A)  The  District  Magistrate  or  the  Chief  Metropolitan  Magistrate  may  authorise  any  officer 

subordinate to him,— 

(i) to take possession of such assets and documents relating thereto; and 

(ii) to forward such assets and documents to the secured creditor.] 

(2)  For  the  purpose  of  securing  compliance  with  the  provisions  of  sub-section  (1),  the  Chief 
Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or 
cause to be used, such force, as may, in his opinion, be necessary. 

(3) No act of the Chief Metropolitan Magistrate or the District Magistrate 1[any officer authorised by 
the Chief Metropolitan Magistrate or District Magistrate] done in pursuance of this section shall be called 
in question in any court or before any authority. 

15. Manner and effect of take over of management.—(1) 3[When the management of business of a 
borrower istaken over by a  4[asset reconstruction company] under clause (a) of section 9 or, as the case 
may be, by a secured creditor under clause (b) of sub-section (4) of section 13], the secured creditor may, 
by publishing a notice in a newspaper published in English language and in a newspaper published in an 
Indian language in circulation in the place where the principal office of the borrower is situated, appoint 
as many persons as it thinks fit— 

(a) in a case in which the borrower is a company as defined in the Companies Act, 1956 (1 of 

1956), to be the directors of that borrower in accordance with the provisions of that Act; or 

(b) in any other case, to be the administrator of the business of the borrower. 

(2) On publication of a notice under sub-section (1),— 

(a)  in  any  case  where  the  borrower  is  a  company  as  defined  in  the  Companies  Act,  
1956  (1  of  1956), all  persons  holding  office  as directors  of the  company  and  in  any  other case,  all 
persons holding any office having power of superintendence, direction and control of the business of 

1. Ins. by Act 44 of 2016, s. 12 (w.e.f. 1-9-2016). 
2. Ins. by Act 1 of 2013, s. 6 (w.e.f. 15-1-2013). 
3.  Subs.  by  Act  30  of  2004,  s.  9,  for  “When  the  management  of  business  of  a  borrower  is  taken  over  by  a  secured  creditor”  

(w.e.f. 11-11-2004). 

4. Subs. by Act 44 of 2016, s. 3, for “securitisation company or reconstruction company” (w.e.f. 1-9-2016). 

21 

 
                                                           
the borrower immediately before the publication of the notice under sub-section (1), shall be deemed 
to have vacated their offices as such; 

(b)  any  contract  of  management  between  the  borrower  and  any  director  or  manager  thereof 
holding  office  as  such  immediately  before  publication  of  the  notice  under  sub-section  (1),  shall  be 
deemed to be terminated; 

(c) the directors or the administrators appointed under this section shall take such steps as may be 
necessary  to  take  into  their  custody  or  under  their  control  all  the  property,  effects  and  actionable 
claims  to  which the business  of the borrower is,  or  appears  to be,  entitled  and all the property  and 
effects  of  the  business  of  the  borrower  shall  be  deemed  to  be  in  the  custody  of  the  directors  or 
administrators, as the case may be, as from the date of the publication of the notice; 

(d)  the  directors  appointed  under  this  section  shall,  for  all  purposes,  be  the  directors  of  the 
company of the borrower and such directors or as the case may be, the administrators appointed under 
this section, shall alone be entitled to exercise all the powers of the directors or as the case may be, of 
the  persons  exercising  powers  of  superintendence,  direction  and  control,  of  the  business  of  the 
borrower  whether  such  powers  are  derived  from  the  memorandum  or  articles  of  association  of  the 
company of the borrower or from any other source whatsoever. 

(3)  Where  the  management  of  the  business  of  a  borrower,  being  a  company  as  defined  in  the 
Companies Act, 1956 (1 of 1956), is taken over by the secured creditor, then, notwithstanding anything 
contained in the said Act or in the memorandum or articles of association of such borrower,— 

(a) it shall not be lawful for the shareholders of such company or any other person to nominate or 

appoint any person to be a director of the company; 

(b) no resolution passed at any meeting of the shareholders of such company shall be given effect 

to unless approved by the secured creditor; 

(c)  no  proceeding  for  the  winding  up  of  such  company  or  for  the  appointment  of  a  receiver  in 

respect thereof shall lie in any court, except with the consent of the secured creditor. 

(4) Where the management of the business of a borrower had been taken over by the secured creditor, 
the secured creditor shall, on realisation of his debt in full, restore the management of the business of the 
borrower to him. 

1[Provided that if any secured creditor jointly with other secured creditors or any asset reconstruction 
company  or  financial  institution  or  any  other  assignee  has  converted  part  of  its  debt  into  shares  of  a 
borrower  company  and  thereby  acquired  controlling  interest  in  the  borrower  company,  such  secured 
creditors shall not be liable to restore the management of the business to such borrower.] 

16. No compensation to directors for loss of office.—(1) Notwithstanding anything to the contrary 
contained  in  any  contract or  in  any  other law  for  the  time  being  in  force,  no  managing  director  or  any 
other director or a manager or any person in charge of management of the business of the borrower shall 
be entitled to any compensation for the loss of office or for the premature termination under this Act of 
any contract of management entered into by him with the borrower. 

(2) Nothing contained in sub-section (1) shall affect the right of any such managing director or any 
other director or manager or any such person in charge of management to recover from the business of the 
borrower, moneys recoverable otherwise than by way of such compensation. 

17.  2[Application  against  measures  to  recover  secured  debts].—(1)  Any  person  (including 
borrower),  aggrieved  by  any  of  the  measures  referred  to  in  sub-section  (4)  of  section  13  taken  by  the 

1. Ins. by Act 44 of 2016, s. 13 (w.e.f. 1-9-2016). 
2. Subs. by s. 14, ibid., for “Right to appeal” (w.e.f. 1-9-2016). 

22 

 
                                                           
secured creditor or his authorised officer under this Chapter,1[may make an application along with such 
fee, as may be prescribed,] to the Debts Recovery Tribunal having jurisdiction in the matter within forty-
five days from the date on which such measure had been taken: 

2[Provided that different fees may be prescribed for making the application by the borrower and the 

person other than the borrower.] 

3[Explanation.—For  the  removal  of  doubts,  it  is  hereby  declared  that  the  communication  of  the 
reasons to the borrower by the secured creditor for not having accepted his representation or objection or 
the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not 
entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this 
sub-section.] 

4[(1A) An application under sub-section (1) shall be filed before the Debts Recovery Tribunal within 

the local limits of whose jurisdiction— 

(a) the cause of action, wholly or in part, arises; 

(b) where the secured asset is located; or 

(c) the branch or any other office  of a bank or financial institution is maintaining an account in 

which debt claimed is outstanding for the time being.] 

5[(2)  The  Debts  Recovery  Tribunal  shall  consider  whether  any  of  the  measures  referred  to  in  
sub-section (4) of section 13 taken by the secured creditor for enforcement of security are in accordance 
with the provisions of this Act and the rules made thereunder. 

6[(3)  If,  the  Debts  Recovery  Tribunal,  after  examining  the  facts  and  circumstances  of  the  case  and 
evidence  produced  by  the  parties,  comes  to  the  conclusion  that  any  of  the  measures  referred  to  in  
sub-section (4) of section 13, taken by the secured creditor are not in accordance with the provisions of 
this  Act  and  the  rules  made  thereunder,  and  require  restoration  of  the  management  or  restoration  of 
possession, of the secured assets to the borrower or other aggrieved person, it may, by order,—  

(a) declare the recourse to any one or more measures referred to in sub-section (4) of section 13 

taken by the secured creditor as invalid; and 

(b) restore the possession of secured assets or management of secured assets to the borrower or 
such other aggrieved person, who has made an application under sub-section (1), as the case may be; 
and  

(c) pass such other direction as it may consider appropriate and necessary in relation to any of the 

recourse taken by the secured creditor under sub-section (4) of section 13.] 

(4)  If,  the  Debts  Recovery  Tribunal  declares  the  recourse  taken  by  a  secured  creditor  under  
sub-section  (4)  of  section  13,  is  in  accordance  with  the  provisions  of  this  Act  and  the  rules  made 
thereunder,  then,  notwithstanding  anything  contained  in  any  other  law  for  the  time  being  in  force,  the 
secured  creditor  shall  be  entitled  to  take  recourse  to  one  or  more  of  the  measures  specified  under  
sub-section (4) of section 13 to recover his secured debt. 

1. Subs. by Act 30 of 2004, s. 10, for “may prefer an appeal” (w.e.f. 21-6-2002). 
2. Ins. by s. 10, ibid. (w.e.f. 21-6-2002). 
3. Ins. bys. 10, ibid. (w.e.f. 11-11-2004). 
4. Ins. by Act 44 of 2016, s. 14 (w.e.f. 1-9-2016). 
5. Subs. by Act 30 of 2004, s.10, for sub-sections (2) and (3) (w.e.f. 11-11-2004). 
6. Subs. by Act 44 of 2016, s. 14,for sub-section (3) (w.e.f. 1-9-2016). 

23 

 
 
 
                                                           
1[(4A) Where— 

(i)  any  person,  in  an  application  under  sub-section  (1),  claims  any  tenancy  or  leasehold  rights 
upon  the  secured  asset,  the  Debt  Recovery  Tribunal,  after  examining  the  facts  of  the  case  and 
evidence produced by the parties in relation to such claims shall, for the purposes of enforcement of 
security interest, have the jurisdiction to examine whether lease or tenancy,—  

(a) has expired or stood determined; or 

(b) is contrary to section 65A of the Transfer of Property Act, 1882 (4 of 1882); or 

(c) is contrary to terms of mortgage; or 

(d)  is  created  after  the  issuance  of  notice  of  default  and  demand  by  the  Bank  under  sub-

section (2) of section 13 of the Act; and 

(ii)  the  Debt  Recovery  Tribunal  is  satisfied  that  tenancy  right  or  leasehold  rights  claimed  in 
secured  asset  falls  under  the  sub-clause  (a)  or  sub-clause  (b)  or  sub-clause  (c)  or  sub-clause  (d)  of 
clause (i), then notwithstanding anything to the contrary contained in any other law for the time being 
in  force,  the  Debt  Recovery  Tribunal  may  pass  such  order  as  it  deems  fit  in  accordance  with  the 
provisions of this Act.] 

(5) Any application made under sub-section (1) shall be dealt with by the Debts Recovery Tribunal as 

expeditiously as possible and disposed of within sixty days from the date of such application: 

Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons 
to be recorded in writing, so, however, that the total period of pendency of the application with the Debts 
Recovery Tribunal, shall not exceed four months from the date of making of such application made under 
sub-section (1). 

(6)  If  the  application  is  not  disposed  of  by  the  Debts  Recovery  Tribunal  within  the  period  of  four 
months as specified in sub-section (5), any part to the application may make an application, in such form 
as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious 
disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, 
on  such  application,  make  an  order  for  expeditious  disposal  of  the  pending  application  by  the  Debts 
Recovery Tribunal. 

(7)  Save  as  otherwise  provided  in  this  Act,  the  Debts  Recovery  Tribunal  shall,  as  far  as  may  be, 
dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and 
Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder.] 

17A. [Making of application to Court of District Judge in certain cases.] Omitted by the Jammu and 
Kashmir Reorganization (Adaptation of Central Laws) Order,  2020, vide notification No. S.O. 1123(E) 
dated  (18-3-2020)  and  Vide  Union  Territory  of  Ladakh  Reorganisation  (Adaptation  of  Central  Laws) 
Order, 2020, notification No. S.O. 3774(E), dated (23-10-2020). 

1. Ins. by Act 44 of 2016, s. 14 (w.e.f. 1-9-2016). 

24 

 
 
 
                                                           
18.  Appeal  to  Appellate  Tribunal.—(1)  Any  person  aggrieved,  by  any  order  made  by  the  Debts 
Recovery Tribunal1[under section 17, may prefer an appeal along with such fee, as may be prescribed] to 
the  Appellate  Tribunal  within  thirty  days  from  the  date  of  receipt  of  the  order  of  Debts  Recovery 
Tribunal. 

2[Provided that different fees may be prescribed for filing an appeal by the borrower or by the person 

other than the borrower:] 

3[Provided  further  that  no  appeal  shall  be  entertained  unless  the  borrower  has  deposited  with  the 
Appellate Tribunal fifty per cent. of the amount of debt due from him, as claimed by the secured creditors 
or determined by the Debts Recovery Tribunal, whichever is less: 

Provided also that the Appellate Tribunal may, for the reasons to be recorded in writing, reduce the 

amount to not less than twenty-five per cent. of debt referred to in the second proviso.] 

(2) Save as otherwise provided in this Act, the Appellate Tribunal shall, as far as may be, dispose of 
the  appeal  in  accordance  with  the  provisions  of  the  Recovery  of  Debts  Due  to  Banks  and  Financial 
Institutions Act, 1993 (51 of 1993) and rules made thereunder. 

4[18A.  Validation  of  fees  levied.—Any  fee  levied  and  collected  for  preferring,  before  the 
commencement of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 
2004, an appeal to the Debts Recovery Tribunal or the Appellate Tribunal under this Act, shall be deemed 
always to have been levied and collected in accordance with law as if the amendments made to sections 
17 and 18 of this Act by sections 10 and 12 of the said Act were in force at all material times. 

18B.  [Appeal to  High  Court in certain cases.]  Omitted  by  the Jammu  and  Kashmir  Reorganization 
(Adaptation of Central Laws) Order, 2020, vide notification No. S.O. 1123(E) dated (18-3-2020) and Vide 
Union  Territory  of  Ladakh  Reorganisation  (Adaptation  of  Central  Laws)  Order,  2020,  notification  
No. S.O. 3774(E), dated (23-10-2020). 

5[18C. Right to lodge a caveat.—(1) Where an application or an appeal is expected to be made or 
has  been  made  under  sub-section  (1)  of  section  17  or  section  17A  or  sub-section  (1)  of  section  18or 
section 18B, the secured creditor or any person claiming a right to appear before the Tribunal or the Court 
of District Judge or the Appellate Tribunal or the High Court, as the case may be, on the hearing of such 
application or appeal, may lodge a caveat in respect thereof. 

(2) Where a caveat has been lodged under sub-section (1),— 

(a) the secured creditor by whom the caveat has been lodged (hereafter in this section referred to 
as  the  caveator)  shall  serve  notice  of  the  caveat  by  registered  post,  acknowledgement  due,  on  the 
person by whom the application has been or is expected to be made under sub-section (1); 

(b) any person by whom the caveat has been lodged (hereafter in this section referred to as the 
caveator) shall serve notice of the caveat by registered post, acknowledgement due, on the person by 
whom the application has been or is expected to be made under sub-section (1). 
(3)  Where  after  a  caveat  has  been  lodged  under  sub-section  (1),  any  application  or  appeal  is  filed 
before the Tribunal or the court of District Judge or the Appellate Tribunal or the High Court, as the case 

1. Subs. by Act 30 of 2004, s. 12, for “under section 17, may prefer an appeal” (w.e.f. 21-6-2002). 
2. Ins. by s. 12, ibid. (w.e.f. 21-6-2002). 
3. Ins. by s. 12, ibid. (w.e.f. 11-11-2004). 
4. Ins. by s. 13, ibid. (w.e.f. 11-11-2004). 
5. Ins. by Act 1 of 2013, s. 7 (w.e.f. 15-1-2013). 
*. Vide notification No. S.O. 3912(E), dated 30th October, 2019, this Act is made applicable to the Union territory of Jammu and 
Kashmir and the Union territory of Ladakh. 

25 

 
                                                           
may  be, the Tribunal  or  the  District Judge  or  the  Appellate Tribunal  or  the High  Court,  as  the case may  be, 
shall serve a notice of application or appeal filed by the applicant or the appellant on the caveator. 

(4) Where a notice of any caveat has been served on the applicant or the Appellant, he shall periodically 
furnish  the  caveator  with  a  copy  of  the  application  or  the  appeal  made  by  him  and  also  with  copies  of  any 
paper or document which has been or may be filed by him in support of the application or the appeal. 

(5) Where a caveat has been lodged under sub-section (1), such caveat shall not remain in force after the 
expiry  of  the  period  of  ninety  days  from  the  date  on  which  it  was  lodged  unless  the  application  or  appeal 
referred to in sub-section (1) has been made before the expiry of the said period.] 

STATE AMENDMENT 

Jammu and Kashmir (UT).— 

Amendment of section 18(C)—(i) in sub-section (1), omit “or section 17A”, “or section 18B”, “or the 

court of District Judge” and “or the High Court”; and 

(ii) in sub-section (3), omit “or the court of District Judge” and “or the High Court”. 
[Vide  Order  No.  3807(E)  dated  26th  October,  2020,  the  Union  Territory  of  Jammu  and  Kashmir 

Reorganisation (Adaptation of Central Laws) Third Order, 2020 (w.e.f. 26-10-2020)  
Ladakh (UT).— 

Amendment of section 18(C)— 
(a) In sub-section (1), omit,— 

(i) “or section 17A” and “or section 18B”; and 
(ii) “or the court of District Judge” and “or the High Court” whenever they occur; 
(b) in sub-section (3) omit “or the court of District Judge” and “or the High Court”. 

[Vide Union Territory of  Ladakh Reorganisation (Adaptation of Central Laws) Order, 2020, notification No. 
S.O. 3774(E), dated (23-10-2020).] 

1[19.  Right of borrower to receive compensation  and costs in  certain  cases.—If  the  Debts Recovery 
Tribunal  or  the  Court  of  District  Judge,  on  an  application  made  under  section  17  or  section  17A  or  the 
Appellate Tribunal or the High Court on an appeal preferred under section 18 or section 18A, holds that the 
possession of secured assets by the secured creditor is not in accordance with the provisions of this Act and 
rules  made 
the  
2[concerned borrowers or any other aggrieved person, who has filed the application under section 17 or section 
17A or appeal under section 18 or section 18A, as the case may be, the borrower or such other person] shall be 
entitled to  the payment  of  such  compensation  and  costs as  may  be determined by  such Tribunal  or Court  of 
District Judge or Appellate Tribunal or the High Court referred to in section 18B.]  

to  return  such  secured  assets 

thereunder  and  directs 

the  secured  creditors 

to 

STATE AMENDMENT 

Union Territory of Jammu and Kashmir 

Amendment of section 19.—(i) Omit “or the Court of District Judge”, occurring at both the places; 
(ii) Omit “or section 17A” occurring at both the places; 
(iii) Omit “or the High Court; 
(iv) Omit “or section 18A” occurring at both the places; and 
(v) Omit “or the High Court referred to in section 18B” occurring at the end. 
Insertion of new section:—After section 19, insert— 
19A. Transfer of Pending Applications.—All the pending applications before the court of District Judge 
and the High Court under sections 17A and 18B respectively, shall stand transferred to the Tribunal and the 
Appellate Tribunal, as the case may be. 

[Vide  Order  No.  3807(E)  dated  26th  October,  2020,  the  Union  Territory  of  Jammu  and  Kashmir 

Reorganisation (Adaptation of Central Laws) Third Order, 2020 (w.e.f. 26-10-2020)]. 

Union Territory of Ladakh— 
Section 19.—In section 19,— 

(i)  omit  "or  the  court  of  District  Judge",  "or  the  High  Court"  and  "or  the  High  Court  referred  to  in 

section 18B"; 

(ii) omit “or section 17A" and "or section 18A". 

1. Subs. by Act 30 of 2004, s. 14, for section 19 (w.e.f. 11-11-2004). 
2. Subs. by Act 44 of 2016, s. 15, for “concerned borrowers, such borrower” (w.e.f. 1-9-2016). 

26 

 
 
                                                           
[Vide Union Territory of  Ladakh Reorganisation (Adaptation of Central Laws) Order, 2020, notification No. 
S.O. 3774(E), dated (23-10-2020).] 

CHAPTER IV 
CENTRAL REGISTRY 

20.  Central  Registry.—(1)  The  Central  Government  may,  by  notification,  set  up  or  cause  to  be  set  up 
from such date as it may specify in such notification, a registry to be known as the Central Registry with  its 
own seal for the purposes of registration of transaction of securitisation and reconstruction of financial assets 
and creation of security interest under this Act. 

(2) The head office of the Central Registry shall be at such place as the Central Government may specify 
and  for  the  purpose  of  facilitating  registration  of  transactions  referred  to  in  sub-section  (1),  there  may  be 
established  at  such  other  places  as  the  Central  Government  may  think  fit,  branch  offices  of  the  Central 
Registry. 

(3) The Central Government may, by notification, define the territorial limits within which an office of the 

Central Registry may exercise its functions. 

 (4)  The  provisions  of  this  Act  pertaining  to  the  Central  Registry  shall  be  in  addition  to  and  not  in 
derogation of any of the provisions contained in the Registration Act, 1908 (16 of 1908), the Companies Act, 
1956  (1  of  1956),  the  Merchant  Shipping  Act,  1958  (44  of  1958),  the  Patents  Act,  1970  (39  of  1970),  the 
Motor Vehicles Act,  1988  (49  of  1988),  and  the Designs Act,  2000  (16 of  2000) or  any  other  law  requiring 
registration of charges and shall not affect the priority of charges or validity thereof under those Acts or laws. 

1[20A.Integration  of  registration  systems with  Central  Registry.—(1)  The  Central  Government  may, 
for  the purpose  of  providing  a Central  database,  in  consultation  with  State Governments or  other  authorities 
operating registration system for recording rights over any property or creation, modification or satisfaction of 
any security interest on such property, integrate the registration records of such registration systems with the 
records of Central Registry established under section 20, in such manner as may be prescribed.  

Explanation.—For the purpose of this sub-section, the registration records includes records of registration 
under the Companies Act, 2013 (18 of 2013), the Registration Act, 1908 (16 of 1908), the Merchant Shipping 
Act,  1958 
the  Patents  
the  Motor  Vehicles  Act,  1988 
Act, 1970 (39 of 1970), the Designs Act, 2000 (16 of 2000) or other such records under any other law for the 
time being in force. 

(44  of  1958), 

(59  of  1988), 

(2) The Central Government shall after integration of records of various registration systems referred to in 
sub-section (1) with the Central Registry, by notification, declare the date of integration of registration systems 
and  the date from  which such integrated records shall  be available;  and with  effect  from  such  date, security 
interests over properties which are registered under any registration system referred to in sub-section (1) shall 
be deemed to be registered with the Central Registry for the purposes of this Act. 

20B.  Delegation  of  powers.—The  Central  Government  may,  by  notification,  delegate  its  powers  and 
functions under this Chapter, in relation to establishment, operations and regulation of the Central Registry to 
the Reserve Bank, subject to such terms and conditions as may be prescribed.] 

21. Central Registrar.—(1) The Central Government may, by notification, appoint a person for the 
purpose  of  registration  of  transactions  relating  to  securitisation,  reconstruction  of  financial  assets  and 
security interest created over properties, to be known as the Central Registrar. 

(2) The Central Government may appoint such other officers with such designations as it thinks fit for 
the  purpose  of  discharging,  under  the  superintendence  and  direction  of  the  Central  Registrar,  such 
functions  of  the  Central  Registrar  under  this  Act  as  he  may,  from  time  to  time,  authorise  them  to 
discharge. 

1. Ins. by Act 44 of 2016, s. 16 (w.e.f. 1-9-2016). 

27 

 
                                                           
22.  Register  of  securitisation,  reconstruction  and  security  interest  transactions.—(1)  For  the 
purposes of this Act, a record called the Central Register shall be kept at the head office of the Central 
Registry for entering the particulars of the transactions relating to— 

(a) securitisation of financial assets; 

(b) reconstruction of financial assets; and 
(c)creation of security interest. 

(2) Notwithstanding anything contained in sub-section (1), it shall be lawful for the Central Registrar 
to  keep  the  records  wholly  or  partly  in  computer,  floppies,  diskettes  or  in  any  other  electronic  form 
subject to such safeguards as may be prescribed. 

(3) Where such register is maintained wholly or partly in computer, floppies, diskettes or in any other 
electronic form, under sub-section (2), any reference in this Act to entry in the Central Register shall be 
construed as a reference to any entry as maintained in computer or in any other electronic form. 

(4) The register shall be kept under the control and management of the Central Registrar. 

23.  Filing  of  transactions  of  securitisation,  reconstruction  and  creation  of  security  interest.—
1[(1)]  The  particulars  of  every  transaction  of  securitisation,  asset  reconstruction  or  creation  of  security 
interest shall  be  filed,  with  the  Central  Registrar  in  the  manner  and  on  payment  of such  fee  as  may  be 
prescribed 2***: 

3* 
4[Provided  5***  that  the  Central  Government  may,  by  notification,  require  registration  of  all 
transactions of securitisation, or asset reconstruction or creation of security interest which are subsisting 
on or before the date of establishment of the Central Registry under sub-section (7) of section 20 within 
such period and on payment of such fees as may be prescribed.] 

* 

* 

* 

* 

6[(2) The Central Government may, by notification, require the registration of transaction relating to 

different types of security interest created on different kinds of property with the Central Registry. 

(3)  The  Central  Government  may,  by  rules,  prescribe  forms  for  registration  for  different  types  of 

security interest under this section and fee to be charged for such registration.] 

24.  Modification  of  security  interest  registered  under  this  Act.—Whenever  the  terms  or 
conditions,  or  the  extent  or  operation  of  any  security  interest  registered  under  this  Chapter  are  or  is  
7[asset  reconstruction  company]  or  the  secured  creditors,  as  the  case  may  be,  to  send  to  the  Central 
Registrar, the particulars of such modification, and the provisions of this Chapter as to registration of a 
security  interest  shall  apply  to  such  modification  modified,  it  shall  be  the  duty  of  the  8[asset 
reconstruction company] or the of such security interest. 

25.  9[Asset  reconstruction  company]  or  secured  creditors  to  report  satisfaction  of  security 
interest.—(1) The 9[asset reconstruction company] or the secured creditors as the case may be, shall give 
intimation to the Central Registrar of the payment or satisfaction in full, of any security interest relating to 
the 10[asset reconstruction company] or the secured creditors and requiring registration under this Chapter, 
within thirty days from the date of such payment or satisfaction. 

1. Section 23 numbered as sub-section (1) by Act 44 of 2016, s. 17 (w.e.f. 24-1-2020). 
2.The certain words omitted by s. 17, ibid. (w.e.f. 24-1-2020). 
3. The proviso omitted by s. 17, ibid. (w.e.f. 24-1-2020). 
4. Ins. by Act 1 of 2013, s.8 (w.e.f. 15-5-2013).  
5. The word “further” omitted by Act 44 of 2016, s. 17 (w.e.f. 24-1-2020). 
6. Ins. by s. 17, ibid. (w.e.f. 24-1-2020). 
7. Subs. by Act 44 of 2016, s. 3, for “reconstruction company” (w.e.f. 1-9-2016). 
8. Subs. by s. 3, ibid., for “securitisation company” (w.e.f. 1-9-2016). 
9. Subs. by s. 3, ibid., for “securitisation company or reconstruction company” (w.e.f. 1-9-2016). 
10. Subs. by s. 3, ibid., for “securitisation company or the reconstruction company” (w.e.f. 1-9-2016). 

28 

 
 
 
 
 
 
 
 
 
                                                           
1[(1A)  On  receipt  of  intimation  under  sub-section  (1),  the  Central  Registrar  shall  order  that  a 

memorandum of satisfaction shall be entered in the Central Register.] 

(2)  2[If  the  concerned  borrower  gives  an  intimation  to  the  Central  Registrar  for  not  recording  the 
payment  or  satisfaction  referred  to  in  sub-section  (1),  the  Central  Registrar  shall  on  receipt  of  such 
intimation],  cause  a  notice  to  be  sent  to  the  3[asset  reconstruction  company]  or  the  secured  creditors 
calling upon it to show cause within a time not exceeding fourteen days specified in such notice, as to 
why payment or satisfaction should not be recorded as intimated to the Central Registrar. 

(3) If no cause is shown, the Central Registrar shall order that a memorandum of satisfaction shall be 

entered in the Central Register. 

(4) If cause is shown, the Central Registrar shall record a note to that effect in the Central Register, 

and shall inform the borrower that he has done so. 

26.  Right  to  inspect  particulars  of  securitisation,  reconstruction  and  security  interest 
transactions.—(1)  The  particulars  of  securitisation  or  reconstruction  or  security  interest  entered  in  the 
Central  register  of  such  transactions  kept  under  section  22  shall  be  open  during  the  business  hours  for 
inspection by any person on payment of such fees as may be prescribed. 

(2)  The  Central  Register  referred  to  in  sub-section  (1)  maintained  in  electronic  form  shall  also  be 
open during the business hours for the inspection of any person through electronic media on payment of 
such fees as may be prescribed. 

4[26A.Rectification  by  Central  Government  in  matters  of  registration,  modification  and 

satisfaction, etc.—(1) The Central Government, on being satisfied— 

(a) that the omission to file with the Registrar the particulars of any transaction of securitisation, 
asset  reconstruction  or  security  interest  or  modification  or  satisfaction  of  such  transaction  or;  the 
omission or mis-statement of any particular with respect to any such transaction or modification or 
with respect to any satisfaction or other entry made in pursuance of section 23 or section 24 or section 
25 of the principal Act was accidental or due to inadvertence or some other sufficient cause or it is not 
of a nature to prejudice the position of creditors; or 

(b) that on other grounds, it is just and equitable to grant relief, 

may,  on  the  application  of  a  secured  creditor  or  5[asset  reconstruction  company]  or  any  other  person 
interested  on  such  terms  and  conditions  as  it  may  seem  to  the  Central  Government  just  and  expedient, 
direct  that  the  time  for  filing  of  the  particulars  of  the  transaction  for  registration  or  modification  or 
satisfaction shall be extended or, as the case may require, the omission or mis-statement shall be rectified. 

(2)  Where  the  Central  Government  extends  the  time  for  the  registration  of  transaction  of  security 
interest or securitisation or asset reconstruction or modification or satisfaction thereof, the order shall not 
prejudice any rights acquired in respect of the property concerned or financial asset before the transaction 
is actually registered.] 

1. Ins. by Act 30 of 2004, s. 15 (w.e.f. 11-11-2004). 
2. Subs. by s. 15, ibid., for “The Central Registrar shall, on receipt of such intimation” (w.e.f. 11-11-2004). 
3. Subs. by Act 44 of 2016, s. 3, for “securitisation company” (w.e.f. 1-9-2016). 
4. Ins. by Act 1 of 2013, s. 9 (w.e.f. 15-1-2013).  
5. Subs. by Act 44 of 2016, s. 3, for “securitisation company or reconstruction company” (w.e.f. 1-9-2016). 

29 

 
 
 
                                                           
1[CHAPTER IVA 

REGISTRATION BY SECURED CREDITORS AND OTHER CREDITORS 

26B. Registration by secured creditors and other creditors.—(1) The Central Government may by 
notification,  extend  the  provisions of  Chapter  IV  relating  to  Central  Registry  to all  creditors  other than 
secured  creditors  as  defined  in  clause  (zd)  of sub-section  (1)  of  section  2, for  creation,  modification  or 
satisfaction  of  any  security  interest  over  any  property  of  the  borrower  for  the  purpose  of  securing  due 
repayment of any financial assistance granted by such creditor to the borrower. 

(2)  From  the  date  of  notification  under  sub-section  (1),  any  creditor  including  the  secured  creditor 
may file particulars of transactions of creation, modification or satisfaction of any security interest with 
the Central Registry in such form and manner as may be prescribed. 

(3)  A  creditor  other  than  the  secured  creditor  filing  particulars  of  transactions  of  creation, 
modification and satisfaction of security interest over properties created in its favour shall not be entitled 
to exercise any right of enforcement of securities under this Act. 

(4) Every authority or officer of the Central Government or any State Government or local authority, 
entrusted  with  the  function  of  recovery  of  tax  or  other  Government  dues  and  for  issuing  any  order  for 
attachment  of  any  property  of  any  person  liable  to  pay  the  tax  or  Government  dues,  shall file  with  the 
Central  Registry  such  attachment  order  with  particulars  of  the  assessee  and  details  of  tax  or  other 
Government dues from such date as may be notified by the Central Government, in such form and manner 
as may be prescribed. 

(5) If any person, having any claim against any borrower, obtains orders for attachment of property 
from any court or other authority empowered to issue attachment order, such person may file particulars 
of such attachment orders with Central Registry in such form and manner on payment of such fee as may 
be prescribed.  

26C.  Effect  of  the  registration  of  transactions,  etc.—(1)  Without  prejudice  to  the  provisions 
contained  in  any  other  law,  for  the  time  being  in  force,  any  registration  of  transactions  of  creation, 
modification  or  satisfaction  of  security  interest  by  a  secured  creditor  or  other  creditor  or  filing  of 
attachment orders under this Chapter shall be deemed to constitute a public notice from the date and time 
of  filing  of  particulars  of  such  transaction  with  the  Central  Registry  for  creation,  modification  or 
satisfaction of such security interest or attachment order, as the case may be. 

(2) Where security interest or attachment order upon any property in favour of the secured creditor or 
any  other  creditor  are  filed  for  the  purpose  of  registration  under  the  provisions  of  Chapter  IV  and  this 
Chapter, the claim of such secured creditor or other creditor holding attachment order shall have priority 
over any subsequent security interest created upon such property and any transfer by way of sale, lease or 
assignment  or  licence  of  such  property  or  attachment  order  subsequent  to  such  registration,  shall  be 
subject to such claim: 

Provided  that  nothing  contained  in  this  sub-section  shall  apply  to  transactions  carried  on  by  the 

borrower in the ordinary course of business. 

1. Ins. by Act 44 of 2016, s. 18 (w.e.f. 24-1-2020). 

30 

 
                                                           
26D. Right of enforcement of securities.—Notwithstanding anything contained in any other law for 
the  time  being  in  force,  from  the  date  of  commencement  of  the  provisions  of  this  Chapter,  no  secured 
creditor shall be entitled to exercise the rights of enforcement of securities under Chapter III unless the 
security interest created in its favour by the borrower has been registered with the Central Registry.  

26E. Priority to secured creditors.—Notwithstanding anything contained in any other law for the 
time being in force, after the registration of security interest, the debts due to any secured creditor shall be 
paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central 
Government or State Government or local authority.  

Explanation.—For  the  purposes  of  this  section,  it  is  hereby  clarified  that  on  or  after  the 
commencement of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), in cases where insolvency or 
bankruptcy  proceedings  are  pending  in  respect  of  secured  assets  of  the  borrower,  priority  to  secured 
creditors in payment of debt shall be subject to the provisions of that Code.] 

CHAPTER V 

OFFENCES AND PENALTIES 

27. Penalties.—If a default is made— 

(a)  in  filing  under  section  23,  the  particulars  of  every  transaction  of  any  securitisation  or  asset 
reconstruction or security interest created by a  1[asset reconstruction company] or secured creditors; 
or 

(b) in sending under section 24, the particulars of the modification referred to in that section; or 

(c) in giving intimation under section 25, every company and every officer of the company or the 
secured creditors and every officer of the secured creditor who is in default shall be punishable with 
fine which may extend to five thousand rupees for every day during which the default continues: 

2[Provided  that  provisions  of  this  section  shall  be  deemed  to  have  been  omitted  from  the  date  of 
coming  into  force  of  the  provisions  of  this  Chapter  and  section  23  as  amended  by  the  Enforcement  of 
Security  Interest  and  Recovery  of  Debts  Laws  and  Miscellaneous  Provisions  (Amendment)  Act,  
2016 (44 of 2016).] 

28.  [Penalties  for  non-compliance  of  direction  of  Reserve  Bank.]  Omitted  by  the  Enforcement  of 
Security  Interest  and  Recovery  of  Debts  Laws  and  Miscellaneous  Provisions  (Amendment)  Act,  
2016(44 of 2016) s. 20 (w.e.f. 1-9-2016). 

29. Offences.—If any person contravenes or attempts to contravene or abets the contravention of the 
provisions of this Act or of any rules made thereunder, he shall be punishable with imprisonment for a 
term which may extend to one year, or with fine, or with both. 

3[30. Cognizance of offences.—(1) No court shall take cognizance of any offence punishable under 
section  27  in  relation  to  non-compliance  with  the  provisions  of  section  23,  section  24  or  section  25  or 
under  section  28  or  section  29  or  any  other  provisions  of  the  Act,  except  upon  a  complaint  in  writing 

1. Subs. by Act 44 of 2016, s. 3, for “securitisation company or reconstruction company” (w.e.f. 1-9-2016). 
2. Ins. by s. 19, ibid. (w.e.f. 24-1-2020). 
3. Subs. by Act 1 of 2013, s. 10, for section 30 (w.e.f. 15-1-2013). 

31 

 
                                                           
made  by  an  officer  of  the  Central  Registry  or  an  officer  of  the  Reserve  Bank,  generally  or  specially 
authorised in writing in this behalf by the Central Registrar or, as the case may be, the Reserve Bank. 

(2)  No  court inferior to  that  of a  Metropolitan  Magistrate or  a Judicial  Magistrate  of  the  first  class 

shall try any offence punishable under this Act.] 

1[30A.  Power  of  adjudicating  authority  to  impose  penalty.—(1)  Where  any  asset  reconstruction 
company or any person fails to comply with any direction issued by the Reserve Bank under this Act the 
adjudicating  authority  may,  by  an  order,  impose  on  such  company  or  person  in  default,  a  penalty  not 
exceeding  one  crore  rupees  or  twice  the  amount  involved  in  such  failure  where  such  amount  is 
quantifiable, whichever is more, and where such failure is a continuing one, a further penalty which may 
extend to one lakh rupees for every day, after the first, during which such failure continues. 

(2) For the purpose of imposing penalty under sub-section (1), the adjudicating authority shall serve a 
notice on the asset reconstruction company or the person in default requiring such company or person to 
show cause why the amount specified in the notice should not be imposed as a penalty and a reasonable 
opportunity of being heard shall be given to such person.  

(3) Any penalty imposed under this section shall be payable within a period of thirty days from the 

date of issue of notice under sub-section (2). 

(4) Where the asset reconstruction company fails to pay the penalty within the specified period under 

sub-section (3), the adjudicating authority shall, by an order, cancel its registration: 

Provided  that  an  opportunity  of  being  heard  shall  be  given  to  such  asset  reconstruction  company 

before cancellation of registration. 

(5)  No  complaint  shall  be  filed  against  any  person  in  default  in  any  court  pertaining  to  any  failure 
under  sub-section  (1)  in  respect  of  which  any  penalty  has  been  imposed  and  recovered  by  the  Reserve 
Bank under this section. 

(6) Where any complaint has been filed against a person in default in the court having jurisdiction no 

proceeding for imposition of penalty against that person shall be taken under this section. 

Explanation.—For the purposes of this section and sections 30B, 30C and 30D,— 

(i) “adjudicating authority” means such officer or a committee of officers of the Reserve Bank, 

designated as such from time to time, by notification, by the Central Board of Reserve Bank; 

(ii)  “person  in  default”  means  the  asset  reconstruction  company  or  any  person  which  has 
committed  any  failure,  contravention  or  default  under  this  Act  and  any  person  incharge  of  such 
company  or  such  other  person,  as  the  case  may  be,  shall  be  liable  to  be  proceeded  against  and 
punished under section 33 for such failure or contravention or default committed by such company or 
person.  

30B.  Appeal  against  penalties.—A  person  in  default,  aggrieved  by  an  order  passed  under  
sub-section (4) of section 30A, may, within a period of thirty days from the date on which such order is 
passed, prefer an appeal to the Appellate Authority: 

Provided that the Appellate Authority may entertain an appeal after the expiry of the said period of 

thirty days, if it is satisfied that there was sufficient cause for not filing it within such period.  

1. Ins. by Act 44 of 2016, s. 21 (w.e.f. 1-9-2016). 

32 

 
                                                           
30C. Appellate Authority.—(1) The Central Board of Reserve Bank may designate such officer or 

committee of officers as it deems fit to exercise the power of Appellate Authority. 

(2)  The  Appellate  Authority  shall  have  power  to  pass  such  order  as  it  deems  fit  after  providing  a 

reasonable opportunity of being heard to the person in default. 

(3)  The  Appellate  Authority  may,  by  an  order  stay  the  enforcement  of  the  order  passed  by  the 

adjudicating authority under section 30A, subject to such terms and conditions, as it deems fit. 

(4) Where the person in default fails to comply with the terms and conditions imposed by order under 

sub-section (3) without reasonable cause, the Appellate Authority may dismiss the appeal. 

30D.  Recovery  of  penalties.—(1)  Any  penalty  imposed  under  section  30A shall be recovered as  a 
“recoverable  sum”  and  shall  be  payable  within  a  period  of  thirty  days  from  the  date  on  which  notice 
demanding payment of the recoverable sum is served upon the person in default and, in the case of failure 
of payment by such person within such period, the Reserve Bank may, for the purpose of recovery,— 

(a) debit the current account, if any, of the person in default maintained with the Reserve Bank or 
by  liquidating  the  securities,  if  any,  held  to  the  credit  of  such  person  in  the  books  of  the  Reserve 
Bank; 

(b) issue a notice to the person from whom any amount is due to the person in default, requiring 
such  person  to  deduct  from  the  amount  payable  by  him  to  the  person  in  default,  such  amount 
equivalent to the amount of the recoverable sum, and to make payment of such amount to the Reserve 
Bank. 

(2) Save as otherwise provided in sub-section (4), a notice issued under clause (b) of sub-section (1) 
shall be binding on every person to whom it is issued, and, where such notice is issued to a post office, 
bank or an insurance company, it shall not be necessary to produce any pass book, deposit receipt, policy 
or  any  other  document  for  the  purpose  of  any  entry  or  endorsement  thereof  before  payment  is  made, 
notwithstanding any rule, practice or requirement to the contrary. 

(3) Any claim in respect of any amount, arising after the date of issue of notice under sub-section (1) 

shall be void as against the demand contained in such notice. 

(4)  Any  person,  to  whom  the  notice  is  sent  under  sub-section  (1),  objects  to  such  notice  by  a 
statement on oath that the sum demanded or any part thereof is not due to the person in default or that he 
does not hold any money for or on account of the person in default, then nothing contained in this section 
shall be deemed to require, such person to pay such sum or part thereof, as the case may be.  

(5)  Where  it  is  found  that  statement  made  by  the  person  under  sub-section  (4)  is  false  in  material 
particulars, such person shall be personally liable to the Reserve Bank to the extent of his own liability to 
the  person  in  default  on  the  date  of  the  notice,  or  to  the  extent  of  the  recoverable  sum  payable  by  the 
person in default to the Reserve Bank, whichever is less. 

(6) The Reserve Bank may, at any time, amend or revoke any notice issued under sub-section (1) or 

extend the time for making the payment in pursuance of such notice. 

(7)  The  Reserve  Bank  shall  grant  a  receipt  for  any  amount  paid  to  it  in  compliance  with  a  notice 
issued under this section and the person so paying shall be fully discharged from his liability to the person 
in default to the extent of the amount so paid. 

33 

 
(8) Any person discharging any liability to the person in default after the receipt of a notice under this 

section shall be personally liable to the Reserve Bank— 

(a) to the extent of his own liability to the person in default so discharged; or 

(b) to the extent of the recoverable sum payable by the person in default to the Reserve Bank, 

whichever is less. 

(9)  Where  the  person  to  whom  the  notice  is  sent  under  this  section,  fails  to  make  payment  in 
pursuance thereof to the Reserve Bank, he shall be deemed to be the person in default in respect of the 
amount specified in the notice and action or proceedings may be taken or instituted against him for the 
realisation of the amount in the manner provided in this section. 

(10)  The  Reserve  Bank  may  enforce  recovery  of  recoverable  sum  through  the  principal  civil  court 
having  jurisdiction  in  the  area  where  the  registered  office  or  the  head  office  or  the  principal  place  of 
business of the person in default or the usual place of residence of such person is situated as if the notice 
issued by the Reserve Bank were a decree of the Court. 

(11)  No  recovery  under  sub-section  (10)  shall  be  enforced,  except  on  an  application  made  to  the 
principal civil court by an officer of the Reserve Bank authorised in this behalf certifying that the person 
in default has failed to pay the recoverable sum.] 

CHAPTER VI 

MISCELLANEOUS 

31. Provisions of this Act not to apply in certain cases.—The provisions of this Act shall not apply 

to— 

(a) a lien on any goods, money or security given by or under the Indian Contract Act, 1872 (9 of 

1872) or the Sale of Goods Act, 1930 (3 of 1930) or any other law for the time being in force; 

(b) a pledge of movables within the meaning of section 172 of the Indian Contract Act, 1872 (9 of 

1872); 

(c) creation of any security in any aircraft as defined in clause (1) of section 2 of the Aircraft Act, 

1934 (24 of 1934); 

(d)  creation  of  security  interest  in  any  vessel  as  defined  in  clause  (55)  of  section  3  of  the 

Merchant Shipping Act, 1958 (44 of 1958); 

1* 

* 

* 

* 

* 

(f) any rights of unpaid seller under section 47 of the Sale of Goods Act, 1930 (3 of 1930); 

(g)  2[any  properties  not liable to  attachment  (excluding  the  properties  specifically  charged  with 
the debt recoverable under this Act)]or sale under the first proviso to sub-section (1) of section 60 of 
the Code of Civil Procedure, 1908 (5 of 1908); 

(h)  any  security  interest  for  securing  repayment  of  any  financial  asset  not  exceeding  one  lakh 

rupees; 

(i) any security interest created in agricultural land; 

1. Omitted by Act 44 of 2016, s. 22 (w.e.f. 1-9-2016).  
2. Subs. by Act 30 of 2004, s. 17, for “any properties not liable to attachment” (w.e.f. 11-11-2004). 

34 

 
 
 
 
 
 
 
 
                                                           
(j)  any  case in  which the  amount  due  is less  than twenty  per cent.  of the  principal  amount and 

interest thereon. 

1[31A.  Power  to  exempt  a  class  or  classes  of    banks  or  financial  institutions.—(1)The  Central 

Government may, by notification in the public interest, direct that any of the provisions of this Act,— 

(a) shall not apply to such class or classes of banks or financial institutions; or 

(b)  shall  apply  to  the  class  or  classes  of  banks  or  financial  institutions  with  such  exceptions, 

modifications and adaptations, as may be specified in the notification. 

2[(2) A copy of every notification proposed to be issued under sub-section (1), shall be laid in draft 
before  each  House  of  Parliament,  while  it  is  in  session,  for  a  total  period  of  thirty  days,  and  if,  both 
Houses agree in disapproving the issue of notification or both Houses agree in making any modification 
in the notification, the notification shall not be issued or, as the case may be, shall be issued only in such 
modified form as may be agreed upon by both the Houses. 

(3) In reckoning any such period of thirty days as is referred to in sub-section (2), no account shall be 
taken of any period during which the House referred to in sub-section (2) is prorogued or adjourned for 
more than four consecutive days. 

(4) The copies of every notification issued under this section shall, as soon as may be after it has been 

issued, be laid before each House of Parliament.]] 

32. Protection of action taken in good faith.—No suit, prosecution or other legal proceedings shall 
lie against  3[the Reserve Bank or the Central Registry or any secured creditor or any of its officers] for 
anything done or omitted to be done in good faith under this Act. 

33.  Offences  by  companies.—(1)  Where  an  offence  under  this  Act  has  been  committed  by  a 
company, every person who at the time the offence was committed was incharge of, and was responsible 
to, the company, for the conduct of the business of the company, as well as the company, shall be deemed 
to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: 

Provided  that  nothing  contained  in  this  sub-section  shall  render  any  such  person  liable  to  any 
punishment provided in this Act, if he proves that the offence was committed without his knowledge or 
that he had exercised all due diligence to prevent the commission of such offence. 

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been 
committed  by  a  company  and  it  is  proved  that  the  offence  has  been  committed  with  the  consent  or 
connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other 
officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty 
of the offence and shall be liable to be proceeded against and punished accordingly. 

Explanation.—For the purposes of this section,— 

(a) “company'' means any body corporate and includes a firm or other association of individuals; 

and 

(b) “director'', in relation to a firm, means a partner in the firm. 

34. Civil court not to have jurisdiction.—No civil court shall have jurisdiction to entertain any suit 
or  proceeding  in  respect  of  any  matter  which  a  Debts  Recovery  Tribunal  or  the  Appellate  Tribunal  is 

1. Ins. by Act 1 of 2013, s. 11 (w.e.f. 15-1-2013). 
2. Subs. by Act 44 of 2016, s. 23, for sub-section (2) (w.e.f. 1-9-2016). 
3. Subs. by Act 44 of 2016, s. 24, for “any secured creditor or any of his officers or manager exercising any of the rights of the 

secured creditor or borrower” (w.e.f. 1-9-2016). 

35 

 
                                                           
empowered  by  or  under this  Act to  determine and  no  injunction  shall be  granted  by  any  court  or  other 
authority in respect of any action taken or to be taken in pursuance of any power conferred by or under 
this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993). 

35. The provisions of this Act to override other laws.—The provisions of this Act shall have effect, 
notwithstanding anything inconsistent therewith contained in any other law for the time being in force or 
any instrument having effect by virtue of any such law. 

36.  Limitation.—No  secured  creditor  shall  be  entitled  to  take  all  or  any  of  the  measures  under  
sub-section (4) of section 13, unless his claim in respect of the financial asset is made within the period of 
limitation prescribed under the Limitation Act, 1963 (36 of 1963). 

37. Application of other laws not barred.—The provisions of this Act or the rules made thereunder 
shall  be  in  addition  to,  and  not  in  derogation  of,  the  Companies  Act,  1956  (1  of  1956),  the 
SecuritiesContracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 
1992  
(15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or 
any other law for the time being in force.  

38.  Power  of  Central  Government  to  make  rules.—(1)  The  Central  Government  may,  by 
notification  and  in  the  Electronic  Gazette  as  defined  in  clause  (s)  of  section  2  of  the  Information 
Technology Act, 2000 (21 of 2000), make rules for carrying out the provisions of this Act. 

(2)  In  particular,  and  without  prejudice  to  the  generality  of  the  foregoing  power,  such  rules  may 

provide for all or any of the following matters, namely:— 

1[(a) other business or commercial rights of similar nature under clause (t) of section 2;] 

2[(aa)]  the  form  and  manner  in  which  an  application  may  be  filed  under  sub-section  (10)  of 

section 13; 

(b) the manner in which the rights of a secured creditor may be exercised by one or more of his 

officers under sub-section (12) of section 13; 

3[(ba) the fee for making an application to the Debts Recovery Tribunal under sub-section (1) of 

section 17; 

(bb)  the  form  of  making  an  application  to  the  Appellate  Tribunal  under  sub-section  (6)  of  

section 17; 

(bc)  the  fee  for  preferring  an  appeal  to  the  Appellate  Tribunal  under  sub-section  (1)  of  section 

18;] 

1[(bca)  the  manner  of  integration  of  records  of  various  registration  systems  with  the  records  of 

Central Registry under sub-section (1) of section 20A; 

(bcb) the terms and conditions of delegation of powers by the Central Government to the Reserve 

Bank under section 20B;] 

(c) the safeguards subject to which the records may be kept under sub-section (2) of section 22; 

(d) the manner in which the particulars of every transaction of securitisation shall be filed under 

section 23 and fee for filing such transaction; 

1. Ins. by Act 44 of 2016, s. 25 (w.e.f. 1-9-2016). 
2. Clause (a) renumbered as clause (aa) by s. 25, ibid. (w.e.f. 1-9-2016). 
3. Ins. by Act 30 of 2004, s. 18 (w.e.f. 11-11-2004). 

36 

 
                                                           
 1[(da)  the  form  for  registration  of  different  types  of  security  interests  and  fee  thereof  under  

sub-section (3) of section 23;] 

(e) the fee for inspecting the particulars of transactions kept under section 22 and entered in the 

Central Register under sub-section (1) of section 26; 

(f) the fee for inspecting the Central Register maintained in electronic form under sub-section (2) 

of section 26; 

1[(fa)  the  form  and  the  manner  for  filing  particulars  of  transactions  under  sub-section  (2)  of 

section 26B; 

(fb) the form and manner of filing attachment orders with the Central Registry and the date under 

sub-section (4) of section 26B; 

(fc) the form and manner of filing particulars of attachment order with the Central Registry and 

the fee under sub-section (5) of section 26B;] 

(g) any other matter which is required to be, or may be, prescribed, in respect of which provision 

is to be, or may be, made by rules. 

(3) Every rule made under this Act shall be laid, as soon as may be after it is made, before each House 
of  Parliament,  while  it  is  in  session,  for  a  total  period  of  thirty  days  which  may  be  comprised  in  one 
session  or  in  two  or  more  successive  sessions,  and  if,  before  the  expiry  of  the  session  immediately 
following the session or the successive sessions aforesaid, both Houses agree in making any modification 
in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only 
in such modified form or be of no effect, as the case may be; so, however, that any such modification or 
annulment shall be without prejudice to the validity of anything previously done under that rule. 

39.  Certain  provisions  of  this  Act  to  apply  after  Central  Registry  is  set  up  or  cause  to  be  set 
up.—The provisions of sub-sections (2), (3) and (4) of section 20 and sections 21, 22, 23, 24, 25, 26 and 
27 shall apply after the Central Registry is set up or cause to be set up under sub-section (1) of section 20. 

40. Power to remove  difficulties.—(1)  If  any  difficulty  arises  in  giving  effect to  the  provisions  of 
this Act, the Central Government may, by order published in the Official Gazette, make such provisions 
not inconsistent with the provisions of this Act as may appear to be necessary for removing the difficulty:  

Provided that no order shall be made under this section after the expiry of a period of two years from 

the commencement of this Act. 

(2) Every order made under this section shall be laid, as soon as may be after it is made, before each 

House of Parliament. 

41.  Amendments  to  certain  enactments.—The  enactments  specified  in  the  Schedule  shall  be 

amended in the manner specified therein. 

42.  Repeal  and  saving.—(1)  The  Securitisation  and  Reconstruction  of  Financial  Assets  and 

Enforcement of Security Interest (Second) Ordinance, 2002 (Ord. 3 of 2002) is hereby repealed. 

(2) Notwithstanding such repeal, anything done or any action taken under the said Ordinance shall be 

deemed to have been done or taken under the corresponding provisions of this Act. 

1. Ins. by Act 44 of 2016, s. 25 (w.e.f. 1-9-2016). 

37 

 
 
                                                           
THE SCHEDULE 

(See section 41) 

Year 

Act No.  Short title 

Amendment 

1956 

1 

The Companies  
Act, 1956. 

In  section  4A,  in  sub-section  (1),  after  clause  (vi),  insert  the 
following:— 

1956 

42 

1986 

1 

The Securities 
Contracts 
(Regulation) 
Act, 1956. 

The Sick 
Industrial 
Companies 
(Special 
Provisions) 
Act, 1985. 

“(vii) 

the  1[asset  reconstruction  company]  which  has 
obtained  a  certificate  of  registration  under  sub-section  (4)  or 
section 3 of the Securitisation and Reconstruction of Financial 
Assets and Enforcement of Security Interest Act, 2002.”. 

In  section  2,  in  clause  (h),  after  sub-clause  (ib),  insert  the 
following:— 

“(ic) security receipt as defined in clause (zg) of section 2 of 
the  Securitisation  and  Reconstruction  of  Financial  Assets  and 
Enforcement of Security Interest Act, 2002.”. 

In  section  15,  in  sub-section  (1),  after  the  proviso,  insert  the 
following:— 

“Provided  further  that  no  reference  shall  be  made  to  the 
Board  for  Industrial  and  Financial  Reconstruction  after  the 
commencement  of  the  Securitisation  and  Reconstruction  of 
Financial  Assets  and  Enforcement  of  Security  Interest  Act, 
2002,  where  financial  assets  have  been  acquired  by  any  
2[asset  reconstruction  company]  under  sub-section  (1)  of 
section 5 of that Act: 

Provided  also  that  on  or  after  the  commencement  of  the 
Securitisation  and  Reconstruction  of  Financial  Assets  and 
Enforcement of Security  Interest Act, 2002, where a reference 
is  pending  before  the  Board  for  Industrial  and  Financial 
Reconstruction,  such  reference  shall  abate  if  the  secured 
creditors, representing not less than three-fourth in value of the 
amount outstanding against financial assistance disbursed to the 
borrower of such secured creditors, have taken any measures to 
recover their secured debt under sub-section (4) of section 13 of 
that Act.”. 

1. Subs. by Act 44 of 2016, s. 3, for “securitisation company or the reconstruction company” (w.e.f. 1-9-2016). 
2. Subs. by s. 3, ibid., for “securitisation company or reconstruction company” (w.e.f. 1-9-2016). 

38 

 
 
                                                           
